http://www.progressive-economics.ca/2009/07/11/another-economics-journalism-is-possible/

Michael’s segment on September 1 (in conversation with host Matt Galloway) focused on the Statistics Canada GDP release.  It was a sensible and largely uncontroversial discussion, with Michael taking a relatively bearish position about the state of Canada’s non-recovery.  In fact, I generally agreed with his analysis.

Then Matt mentioned and briefly quoted from my commentary that same morning in the Globe and Mail (http://www.progressive-economics.ca/2010/09/01/capitalism-upside-down/).  That unleashed the following exchange which I present without comment as a statement on the condition of economics journalism in Canada. (This kind of thing is hardly unusual; you get it all the time in places like Lang-O’Leary, BNN, and the National Post.)

You can listen to the original show (if interested) here: http://www.cbc.ca/metromorning/2010/09/gdp-growth.html

The good folks at Metro Morning invited me onto the show with Michael the next morning.  Nobody apologized for any offense (and none was taken), but we had a very decent exchange that you can listen to here:

http://www.cbc.ca/metromorning/2010/09/get-a-real-job.html

Here’s the transcript of the September 1 segment:

Matt: Jim Stanford, economist with the Canadian Auto Workers union, wrote an editorial in the Globe and Mail this morning, and he says that it’s not - and we discussed this earlier - not the role of government in creating recovery, restarting our economy and getting it going. That it’s actually the role of business. This is a quotation from what Jim wrote: “Business should be leading economic recovery, borrowing money (from households and banks) to fund new investments and jobs.  That’s how capitalism is supposed to work.”

Michael: If he believes it so much, why doesn’t he actually do something useful, and actually borrow money and start a business. Really! It’s very easy to say, ‘Let everybody else do something, let everybody else take the risk.’ What does he do? He basically reaches into the hands of hard-working people, ripping out money.  I’m telling you, but you’re saying, you’re bringing it up.

Matt: I just, I just asked.

Michael: I know, and I’m just saying, ‘Get a real job. Do something useful.’

Matt: Isn’t that the role of business, though? Shouldn’t business have a role to play?

Michael: Businesses or individuals. Individuals make choices. Free choices about doing what they do.

Matt: But they’re also part of…

Michael: In the same article, he can’t even keep this nonsense straight. He’s talking about an inventory buildup. He says, ‘Moreover, the growth’ - now that we’re quoting it - ‘the growth that did occur was due solely to inventory accumulation. Strip out new inventories and real GDP actually declined.’ So now he’s saying that businesses should invest more when the inventories they’re producing aren’t even being sold. It’s ridiculous.

Matt: How worried are you when all of these numbers start to come together? Again, you’ve been on this saying that we’re not in a recovery, and we get that part of it.  A jobless recovery is no recovery at all. But when you have data saying that the trade deficit is huge, that growth is almost at a standstill, are you really worried?

Michael: Personally I’m not worried, because I set my alarm clock early in the morning and I do an honest day’s work. And I would … but you know … but I would … I would recommend very very strongly that people think as carefully as possible and systematically as possible how they can create more value. Because if individuals do that, then all the problems are solved.

My first thought is to hope that the Conference Board does a better job on potash than it did on TILMA.

My second thought is, “Doesn’t Saskatchewan have a civil service?” Presumably, the provincial government already employs people who have far more specialized knowledge of the potash industry and provincial potash royalties than a generic economic consultancy.

If the Government of Saskatchewan genuinely lacks such in-house expertise, then it should do some hiring. But one fears that it is not seeking expertise, so much as an external validator.

The Jurist has more.

“The Saskatchewan government signalled Wednesday that it is unlikely to support a takeover of the Saskatoon-based company by a sovereign wealth fund or other state-owned firm from China or other large potash-buying nation. The fear is that the new owner’s primary motive – to supply food and fertilizer for their populations – would conflict with the province’s goal of supporting its people through higher potash prices.

“It would seem to us at first glance that their interest and the interest of taxpayers of Saskatchewan may not be aligned,” Saskatchewan Energy Minister Bill Boyd said in an interview.”

Perhaps I am missing something but is this more logical than saying a propos of BHP Billiton or other foreign capitalist suitors:

“The fear is that the new owner’s primary motive – to maximize profits for non Saskatchewan residents  – would conflict with the province’s goal of supporting its people through higher potash prices.

“It would seem to us at first glance that their interest and the interest of taxpayers of Saskatchewan may not be aligned.”

Be the purchaser capitalist or state capitalist, the province still owns the resource and can set royalties as it sees fit. If that power is not enough, then perhaps the province should take over the company itself.

So how do we move ahead to create a movement for change that will excite people about the world that could be, and put our ruling class on the defensive? For starters, we need to better focus our energies on articulating a vision and some clear highly strategic “game changing” steps towards that vision.

Second, we need to name and challenge capitalism as an economic system, the manifestations of which are the root of most activist causes. Given the Spirit Level evidence on the health and social problems associated with inequality, a full-frontal assault on the causes of inequality is badly needed. And radical changes are also required that stop our economy from trashing the planet (or the planet will soon find its own ways of stopping us).

Third, it is worth remembering the lessons of the Regina Manifesto, which set out a list of key demands that were outrageous in the 1930s. But many of the ideas in the Manifesto were in fact implemented over the course of several decades. That is, the Left needs a long game, and is too often distracted by reacting to short-term policy issues.

The game changers need to be measures that fundamentally alter the balance of power between corporations (and compliant governments) and ordinary people, building on the successes that have remained resilient to the onslaught of expanding markets for for-profit enterprise (in BC, public auto insurance, BC Hydro, BC Ferries, the Agricultural Land Reserve, public health care and education are all examples that have held their own against right-wing governments; perhaps bruised but still very much alive). Game changers, almost by definition, need to be bold, and ordinary people need to see that such moves will improve their day-to-day lives.

Here’s a list of (and a short rationale for) a number of ideas that would fundamentally change the nature of the “game” rather than seeking modest improvements at the margins (many of which have had lengthier discussions previously on this blog):

Guaranteed income – The creation of a basic or guaranteed income at a sufficient level would greatly enhance the bargaining power of workers by removing the fear of destitution that forces people to take crappy jobs (or worse) in order to survive. It therefore puts upwards pressure on wages at the lower end of ladder. It might lead to a lower employment rate and reduced average hours of work, not necessarily a bad thing, but could also be a means by which society supports artists and other professions that are more marginal economically. A guaranteed income would have to be federal due to mobility issues, and probably would be best modeled on the OAS or CCTB with a long phase-out period, rather than a universal demogrant. This would also eliminate provincial welfare bureaucracies and the federal EI system, but importantly would consolidate all income support programs federally. This transfer would also be adjusted upwards to compensate for price changes arising from carbon taxes, higher energy prices and higher food prices, all of which are likely consequences of aggressive climate action plans.

Sectoral bargaining – Unions have made some headway in the low-wage service sector, but small shops and high turnover confound organizing. Sectoral bargaining is an approach to unionizing the service sector that would give broad sectors (retail, restaurants, security, etc) a vote on whether to demand collective bargaining and if approved, different unions could then make their pitches on ability to represent those workers. This would quickly increase union density across the economy and lead to wage compression. For employers, it puts all work on a level playing field, so that there are no competitiveness issues, and wage increases would generally be passed on to consumers in the form of higher prices. Another related model to study is the German model of regional wage-setting institutions, which goes even deeper to include works councils (shop-level management practices that include workers in decision making) and co-determined boards (that give workers in large companies half the seats on the board).

Reigning in corporations – As documented by the Aurora Institute and the film, The Corporation, reforms to the way corporations are chartered are necessary. Currently, shareholders and executives benefit from limited liability (e.g. in the case BP oil spill, shareholders’ losses are limited to the price they paid for their shares), free speech (in advertising and politics), and deductions for entertainment and meals (boxes at hockey games, for example) – all of which should be eliminated or modified. A maximum level of executive compensation (related to the pay at the bottom of the company) could be established. Corporations also benefit from an expensive legal system that allows them to sue individuals (or intimidate by threat of lawsuit) for all manner of things. Corporations can be a useful organization form but they should have to prove their benefit to society, with sunsets on their corporate charters and a process for renewal. And to the extent that their useful economic activities could be performed by public enterprises, worker-owned enterprises or cooperatives, so much the better.

Abolish intellectual property – Copyright and patents create monopolies that raise prices for consumers. Historically, laws have tried to strike a balance between the right of creators to benefit economically from their work and the rights of society to benefit from that work (which is inevitably the product of a whole society). It is not obvious at all that artists and inventors only create in the presence of strong IP laws. And in a world of large entertainment and pharmaceutical corporations with massive advertising budgets and huge upfront costs of production, this logic gets put on its head anyway. The result is that IP as we know it is a huge contributor the rising share of income going to the very top of the income distribution. Economist David Levine argues for going the opposite way: make Canada an IP haven where people from around the world can come specifically to innovate on the work of others, meaning this could create a lot of interesting tech jobs in Canada.

Reclaim the new “Commanding Heights” – Key sectors of the economy should be brought into the public sector through aggressive regulation, nationalization or creation of public competitors. In telecommunications, for example, Canada has the most expensive prices in the advanced countries due to the oligopolistic practices of a handful of large telecom companies. This could be remedied by regulating prices, nationalizing the “pipes” or using the CBC to create a low-cost public competitor that would force companies to reduce their massive profit margins. Similar cases could be made for banking, oil and gas, pharmaceutical drugs, forestry, mining – although the specific form and strategy would differ depending on the specifics of the industry.

Localize food – New arrangements that promote enhanced local food supplies, with sustainable agricultural practices would help in both mitigation of greenhouse gas emissions and adaptation to peak oil and climate change. This should build on farmers’ markets, buyers’ coops and community shared agriculture projects to include broad-based procurement of local food by public sector (schools, universities, hospitals, prisons, social housing units, BC Ferries, etc) combined with the extension of supply management to fruits, vegetables and perhaps other areas. This would be a benefit to farmers in terms of higher incomes, and, if well-designed, would end hunger and improve nutrition if in combination with an attack on fast food and convenience store junk (i.e. make unhealthy processed food the new tobacco).

Expand the scope of the existing public sector – This is similar to reclaiming the commanding heights but builds on areas where the public sector already has a strong presence. This would include developing an integrated system of early learning and care with the K-12 system, community centres and libraries (”hubs” of local public services with hours that extend well beyond the standard business day). It would expand the umbrella of public health care to dental care, vision care, physiotherapy and other preventative health services. It would bring natural gas distribution back into the public realm to re-create (in the case of BC) an integrated public utility for managing energy and demand-side management programs. It would create a consolidated Crown corporation to manage recycling in BC to close the loop on waste. It would create new housing stock for households of all incomes to build complete communities, and massively expand public transit and infrastructure for bikes.

Radical democracy – 19th century democratic institutions are not adequately meeting the needs of 21st century citizens. Redefining democracy could include deliberative processes, referenda, participatory budgeting, lower the voting age to 16, campaign finance reform, etc (Judy Rebick’s book, Imagine Democracy, is a good starting point). Like the New Politics Initiative of 2001, this is about asserting a new way of doing politics, rather than just a suite of policies. The new democratic regime must also create new powers for municipal governments to act in the interests of local citizens.

Public money creation – There is no reason why money creation (i.e. the expansion of credit) should be the sole domain of the chartered banks. The status quo means money is created to support enterprises that will be profitable (but not necessarily socially or environmentally beneficial), upon which taxes must be levied in order to support public services. Delinking public services from capitalism would mean creation of money would follow democratic priorities. The potential for inflation would be a concern, so implementation would require a phase-in period. But it is worth noting that in 2007, new money created through chartered banks was about $200 billion (an expansion of 10%, and equivalent to 12% of aggregate demand that year, but consistent with low inflation), an amount about the size of the total federal budget. The 2008-09 financial crisis revived the idea of money creation (rather than bond sales) to finance public sector deficits, and while the crisis has died down, looming deleveraging could make make public money creation a necessity.

Tax bads – Public money creation need not preclude good tax measures that alleviate other social and environmental ills. These include higher top marginal income tax rates to reduce inequality, Robin Hood taxes to reduce financial speculation, carbon taxes to reduce greenhouse gases, inheritance taxes to deter dynasties, and taxes on junk food, alcohol and tobacco. On the environmental side these taxes are instrumental to achieving prices that reflect the true costs of extraction, processing, distribution and consumption, and a shift towards closed-loop manufacturing systems.

Legalize pot and most other drugs – Perhaps this is not a substantive game-changer but this issue would allow the left to reclaim some space on the civil liberties side of the fence (and have some fun, too). It makes little sense to continue with prohibition, a system that fosters organized crime (which causes more harm than any health-related impacts of drugs), and criminalizes millions of consumers who are not doing any harm to others. Prohibition is a crusade that does not work in spite of massive public resources dedicated to it. Indeed, legalization would shine daylight on underground activities, create new work in Amsterdam-style “coffee shops”, and provide another source of tax revenue.

Carbon quotas – This is an alternative approach to carbon pricing (carbon taxes) that would allocate to households (or individuals within a household) a share of the annual (and shrinking each year) carbon budget. Because high-income families lead much more carbon intensive lifestyles than low income families, they would have to buy quota from households that had an excess – that is, the system is inherently redistributive, while providing greater certainty about GHG reductions than a carbon tax.

That’s my 12-step program, for now anyway. I’m not particularly hung up on any of these ideas and am interested in others’ thoughts on game changing initiatives. Over to you.

At a moment deleveraging is holding back growth, and  both governments and consumers are cutting back spending, this upside-down behaviour by the business sector makes things far worse.  Canada’s non-financial businesses have saved almost $100 billion during the current recession.  That almost perfectly offsets the $100 billion increase in debt taken on by Canadian governments in the same period.

Below is my full G&M column on this.  Mario Seccarreccia has also raised this point in analyzing Canadian flow-of-funds data.  Michael Hlinka (CBC Toronto) called this argument nonsense on Metro Morning today — so then I must be on to something!

Tepid GDP numbers released yesterday by Statistics Canada confirm that Canada’s economic recovery, such as it was, is sliding completely into the ditch.  We’re clearly heading for stagnation at best, and quite possibly another “double dip” downturn.

The headline number was disappointing, to say the least.  Real GDP grew just 2 percent (annualized) in the spring quarter.  That’s just a hair faster than the U.S. economy (which everyone knows is still deeply in the soup).  Two percent doesn’t keep up with population and productivity - implying higher unemployment ahead, not lower.  Typically, at this stage of recovery, the economy should be growing 3 times faster.

Dig a little deeper, and the picture looks even worse.  Half the growth reported yesterday was a statistical “shadow” of the faster expansion experienced in the first quarter (earlier growth which automatically boosted the second-quarter numbers, whether GDP kept growing or not).  From March through June, actual growth was weaker: about 1 percent annualized.

Moreover, that growth which did occur was due solely to inventory accumulation, as businesses began restocking the shelves in hopes of stronger market conditions.  Strip out new inventories, and real GDP actually declined.  But consumer spending is already slowing down, and now those inventories will drag down future growth.

Another worrisome sign is the continuing deceleration of inflation, as measured by Statistics Canada’s broad GDP deflator.  Inflation fell to less than 1 percent in the spring - and in the consumer sector, prices were falling (deflation).  That further erodes confidence, and increases real debt burdens for consumers and governments.

Yesterday’s data confirm another curious and worrisome trend.  Every economic recovery needs somebody to borrow and spend.  That’s where new purchasing power comes from.  So far, this recovery has been precariously dependent on households and governments to do all the borrowing and spending.  The spirit of growth has yet to infuse the private sector, and consequently Canada’s recovery remains both narrow and precarious.

Debt-happy consumers accounted for much of last year’s rebound.  Their spending was largely channelled into Canada’s short-lived housing bubble (which popped audibly last spring).  With total personal debt now equal to 150 percent of disposable income, we know that consumers must retrench.  Indeed, they’re already cutting back, as evidenced by a big uptick in the saving rate.

Governments, of course, have been the other key source of spending power, through deficit-financed stimulus programs.  Those injections will also start to ebb, as governments at all levels pull back (hopefully not too quickly, or else the threatened double dip will become a sure thing).  So with both consumers and governments tightening their belts, who will lead the next phase of recovery?  It should be business.  But so far, the private sector is still sitting firmly on the bench.

Despite a few signs of life (mostly in the oil and gas industry), overall business investment spending has not bounced back at all.  Business capital investment is only 6 percent higher than in the trough of the recession a year ago.  Yes, profits shrank during the downturn, but are recovering.  And businesses aren’t even re-investing what they get, let alone taking on new debt.  Cash flow (profits plus depreciation) continues to outstrip new capital investment by almost two-to-one.

The odd result of this private-sector passivity is that non-financial firms have actually saved close to $100 billion since the recession began.  That almost perfectly offsets the $100 billion in new debt taken on by our governments over the same period.  In other words, governments (and the taxpayers who fund them) are taking on debt to try to restart a sick economy.  But for every dollar they put in, private firms take a dollar out - in the form of idle, uninvested cash flow, used to pay down their own debt or (worse yet) speculate in the paper markets.

Business should be leading economic recovery, borrowing money (from households and banks) to fund new investments and jobs.  That’s how capitalism is supposed to work.  In today’s lean-and-mean world, however, business is free-riding on the spending efforts of others.  Despite tax cuts and other business-friendly policies, the private sector isn’t taking on the risks, and taking on the debt, necessary to fuel broader recovery.

That longer-run imbalance, not just the weakness evident in the shorter-run economic data, will hold back Canada’s economy for years to come.  Governments clearly need to keep stimulating through budget deficits and low interest rates (rather than choking off recovery with premature tightening).  But in the absence of business leadership, they’ll also have to take on a bigger task: finding ways to directly expand output and create work, filling the vacuum left by the private sector’s continuing failure to borrow and spend.

Canadian Gross Domestic Product (GDP) grew modestly in the second quarter, but that modest growth returned GDP to a level not seen since before the economic crisis.

Recent Developments: The Second Quarter

Canada’s output expanded at a quarterly rate of 0.5%, which corresponds to an annual rate of 2.0%. Such growth would be acceptable in normal times and is somewhat ahead of the US, which recently reported an annual rate of 1.6% for the second quarter.

However, one would hope for stronger growth coming out of a recession. The second quarter pales compared to the first quarter, in which Canada leapt forward at a 5.8% annual rate. (Today, that impressive first-quarter number was revised down from the 6.1% originally reported.)

International trade was the main drag on Canadian growth in the second quarter. A huge rise in imports withdrew far more demand from our economy than a modest rise in exports added. While both imports and exports have been recovering since mid-2009, imports seem to be accelerating while exports appear to be decelerating.

Canada’s domestic economy grew much as it had in the first quarter. Consumer spending and inventory restocking continued to be the main drivers of growth.

Government spending and investment again edged up only slightly. Stimulus spending appears to have peaked by the end of 2009.

The most striking difference from the first quarter is that business investment in machinery and equipment belatedly started to recover in the second quarter. In terms of the overall growth in business investment, a slowdown in residential structures offset the pick-up in machinery and equipment. However, it is good that corporate Canada is finally investing in productive assets instead of real estate.

The Longer View: Saved by Stimulus

Since overall GDP has returned to pre-crisis levels, now is an opportune moment to examine how the different components of GDP changed during the recession:

Canadian Gross Domestic Product ($ billions)

A couple of GDP components, namely residential structures and business inventories, dropped during the recession but have now recovered to pre-recession levels. These components have simply returned to where they started.

Governments did the heavy lifting. Together, government purchases and investment increased even more than consumer spending (+$29 billion vs. +$26 billion). This contribution to the recovery was disproportionately large, given that government purchases and investment were only 38% the size of consumer spending before the recession.

Meanwhile, business investment and exports are still far below pre-recession levels. This shortfall has been offset by lower imports, higher consumer spending, and more government purchases and investment.

The public sector is the most significant offsetting factor. Without stimulus, our economy would still be under water.

With the US on the brink of a relapse into recession or, at best, a period of very slow growth and rising unemployment, all eyes are on the Federal Reserve. After all, it seems to be the only show in town. The conventional wisdom is that there will be no second round of fiscal stimulus forthcoming from the US Congress anytime soon - unless you count the weakest possible stimulus which would be an extension of the Bush tax cuts for the rich. Republicans will veto any major round of public investment, and there is no sign that the Rubinomics team will shift in that direction in the brief time they have left before the Congressional elections to shift the economic policy agenda. 

So that leaves monetary policy. There seems to be an emerging consensus that a new round of quantitiative easing should begin- see for example FT columnist and US correspondent Clive Crook in today’s FT who Krugman claims as an ally in his blog. But what kind of easing should progressives support?

 My old friend Tom Palley has weighed in on the subject in the FT. 

 I was more than a little surprised to see that he calls for a modest increase in interest rates, albeit combined with further Fed purchases of financial assets via renewed quantitative easing. 

I tend to agree with his point that extended ultra low interest rates risk inflating new asset bubbles.

“Raising interest rates in this fashion would also diminish tendencies towards speculation and excessive risk taking. Prolonged very low interest rate environments encourage yield chasing that over-inflates asset prices, and this process often ends in tears.

By chasing yield, households stand to suffer large losses should policy succeed in guiding the economy out of recession, thereby triggering higher interest rates. This risks a vicious double blow to households whose savings and pensions have already suffered from the financial crisis. Moreover, poorer, less financially sophisticated households are likely to suffer most from rising interest rates as the searing effects of the crisis have tilted money flows toward safe investments such as Treasury bonds. Banks are also at risk to the extent they have been parking excess reserves in longer bonds to exploit the slope of the term structure of interest rates.”

He has a point here.  But surely the key point should be that we need expansionary fiscal policy. If we are not going to get it, then do we really want higher interest rates? I think not.

 Palley calls for a new round of purchases of mortgages securities to help revive the moribund US housing market which may make sense, especially for distressed home owners.  It does, however, seem unlikely that we are going to get much impact on the real economy as the housing bubble works its way out.

He adds sensibly that:

“Purchases of state government bonds would lower financing costs for states at a time of large state budget deficits. That could help avoid cutbacks to state and local government employment.”

I was, however,  surpised that he goes on to call for an end to Fed purchases of long term federal bonds, on the rather dubious grounds that higher incomes from higher interest rates would boost consumption.

“Moreover, government interest payments are an income transfer to the private sector, a form of tax rebate. Consequently, increased interest income on government bonds would stimulate consumption spending, especially among households (such as retirees) that rely on such income.

The same logic holds for raising the federal funds rate. This would raise money market and deposit account interest rates, thereby helping savers. To the extent that such financial assets are disproportionately held by lower income households and retirees who spend most of their income, this would boost their income and consumption spending.”

Since when were interest bearing assests disproportionately held by the lower end of the income spectrum, as opposed to pension funds and other large institutional investors?

It strikes me that even though US long term bonds are at historic lows, it remains important for the Federal Reserve to maintain the space for a renewed round of fiscal stimulus. Borrowing costs for the US government are currently so low that a longer term public investment program which could have a major impact on jobs and on growth could be readily financed and increase potential growth moving forwards.

The bottom line is that I am dubious that quantiatitive easing can avert a double dip alone, Rathe, expansionary fiscal policy is the only effective means to ensure that quantitiative easing actually expands real demand in the economy.  The US needs both ultra low interest rates and an active fiscal policy rather than the unwinding of the current anaemic stimulus package which is expiring. 

I fear that even US progressives are starting too place too much faith in what monetary policy can do.

They undertook a broad public survey across 5 countries (the U.S., Canada, U.K., Germany, and France) on the economic and social impacts of the recession.  The survey covered over 6000 individuals (over 2000 in the U.S., and over 1000 in each of the others), and asked a range of questions regarding how the recession changed their behaviour.  It was administered last June.

One question they asked was whether or not respondents had reduced their use of routine medical care services.  This result was striking.  Here is the proportion of respondents in each country who reported reducing their use of routine medical services, in descending order:

U.S.: 26.5%

France: 12%

Germany: 10.3%

U.K.: 7.6%

Canada: 5.6%

The authors make the obvious conclusion: namely, the higher are the out of pocket fees associated with medical care, the more individuals will cut back care when they are worried about their employment and economic security.  Canada and the U.K. have the lowest user fees among the five countries surveyed; and in those countries, there was virtually no change under the recession in patterns of care utilization.

Ironically, of course, there’s no better time to get medical care than during a recession:  Disruptions to normal work are reduced, and the stimulus to spending is helpful macroeconomically.  Think of getting a medical “tune-up” as the personal equivalent of an investment in public infrastructure (which is also highly appropriate during a recession).  Yet market-based care produces the opposite result: a pro-cyclical trend in health care utilization that denies care when individuals (and the economy) need it the most.

This study is striking testimony to the success of Canada’s universal system, and the dangers of privatization, user fees, and the other “reforms” parroted so loudly these days by the CMA and other conservatives.

Perhaps BHP believes that it alone has sufficient clout to manage supply and negotiate overseas prices without Canpotex. But other Saskatchewan potash mines for which BHP is not bidding also rely on Canpotex.

Perhaps BHP believes that it could generate more profit by exporting a significantly larger quantity of potash, without significantly depressing the price. If so, the implication is that Potash Corp management has misjudged the demand curve.

Or maybe BHP plans to flood the offshore market with cheap potash and accept lower profits in the short term. If BHP could thereby put competitors (in Saskatchewan or elsewhere) out of business, it might achieve even more pricing power and greater profits in the long term.

Saskatchewan political leaders, the companies currently mining potash in Canada, and their employees have raised concerns about these possibilities. So, BHP has been backpedalling on the prospect of withdrawing from Canpotex. This backpedalling took an hilarious turn in Wednesday’s Globe and Mail:

Graham Kerr, president of BHP’s potash operations, said if the company’s bid is successful it will study the Canpotex agreement more closely. “I am not close enough to the insights of how Canpotex operates to say if it’s a good, bad or indifferent organization.”

Does Kerr actually expect anyone to believe that BHP bid US$39 billion for Potash Corp without studying Canpotex first? As BHP’s potash president, has he really not formulated any views on Canpotex?

Anyway, if BHP is looking to hire a potash president who has some sense of how Canpotex operates, just e-mail the job posting to: “info [at] progressive-economics.ca”.

I think that my initial take on Abitibi’s NAFTA challenge still holds up pretty well. But here are three further thoughts:

1.) Jim writes, “There is no constitutional way for Ottawa to force Newfoundland to pick up the tab.” Constitutionally, it would actually be quite easy for the federal government to deduct $130 million from its transfer payments to the provincial government. But that would be politically toxic.

2.) It is not unusual for governments to contribute to the restructuring of economically significant, but financially bankrupt, companies like Abitibi (which has many operations in other provinces). So, I wonder to what extent Harper is using the NAFTA challenge to characterize the $130 million as compliance with trade obligations rather than as a “bailout.”

Of course, an explicit federal bailout of Abitibi would be preferable because Ottawa could attach public-interest conditions to the money, obtain equity in the company, and not set such a rotten precedent for future NAFTA challenges. But as Jim notes, federal Conservatives probably view that precedent as “a desirable loss of sovereignty.”

3.) Harper has set another precedent: provincial governments can disregard NAFTA with impunity (although I am not convinced that Newfoundland really violated NAFTA in this case). If “foreign” investors challenge a provincial policy, Ottawa is left holding the bag.

I believe that is one of the federal government’s main motives for encouraging inter-provincial “free trade” deals like TILMA. The goal is not to remove unidentified inter-provincial trade barriers, but to have provincial governments directly commit to NAFTA-style rules.

PS - The old ABC was Premier Williams’ “Anything But Conservative.”

Privatizing Potash was a Costly Mistake

The greatest tragedy in BHP Billiton’s $38.6-billion (U.S.) bid for the Potash Corporation of Saskatchewan (PCS) is that the Government of Saskatchewan previously sold PCS for just $630 million. This privatization was the worst fiscal decision in the province’s history and has been aggravated by subsequent royalty giveaways to private potash companies.

PCS was created in 1975 as a provincial Crown corporation. The Saskatchewan government privatized it in 1989, selling all of its shares by 1994.

Presumably, the proceeds were deducted from the provincial deficit. Borrowing $630 million at 10 per cent interest, compounded over two decades, would have added $4.2 billion of provincial debt by now.

In fact, provincial bond rates have fallen far below 10 per cent since the early 1990s. Also, had PCS shares not been sold, dividend payments to the government would have partly offset interest charges on its additional borrowing. Therefore, $4.2 billion is a very optimistic estimate of privatization’s fiscal benefit.

The fiscal cost of privatization is the amount that PCS would be worth had it remained a Crown corporation. Since privatization, PCS has acquired additional potash mines in Saskatchewan and New Brunswick, phosphate and nitrogen facilities in the U.S. and Trinidad, and shares in other fertilizer companies.

During the 1990s, Crown corporations were encouraged to invest outside the province. Therefore, PCS could have made the same acquisitions and developed along the same lines had it remained a Crown corporation. If so, the fiscal cost of privatization is at least $40 billion (the Canadian-dollar value of BHP’s offer), which is about 10 times the maximum fiscal benefit. 

Of course, privatization supporters would claim that PCS has been better managed as a private company. Had it remained a Crown corporation, PCS might have lacked the initiative or financial ability to expand.

However, the mines that PCS owned in 1989 still account for 80 per cent of its potash production and capacity. Since 70 per cent of the company’s current gross margin is from potash (rather than phosphate and nitrogen), these mines still provide at least 55 per cent of overall profits today.

If PCS had simply held onto those historic assets, it would now be worth more than half of today’s value. Even assuming that PCS would have completely stagnated as a Crown corporation after 1989, the fiscal cost of privatization was still more than five times the maximum fiscal benefit.

Depending upon which assumptions one accepts, the costs of privatization exceeded the benefits by between $18 billion and $36 billion. In other words, the Saskatchewan government gave up between $17,000 and $35,000 for every man, woman and child in the province.

Saskatchewan’s potash reserves still belong to the public. Unfortunately, the provincial government has been slashing the royalties charged to PCS and other companies that mine these reserves. Saskatchewan’s misguided royalty holidays on increased potash production in 2003 and 2005 simply prompted the U.S. and New Brunswick to cut their potash royalties.

This race to the bottom has robbed Saskatchewan residents of an appropriate return on their resource. The potash industry extracted the same tonnage from Saskatchewan in 2005 and 2008. Entirely due to price increases, this output was worth $4.7 billion more in 2008 than in 2005.

Most of this gain should have accrued to the people of Saskatchewan, who own the resource. Yet provincial potash royalties rose by only $1.1 billion between the 2005 and 2008 fiscal years.

The provincial government then refunded much of this money to PCS and other potash companies following the economic crisis. As a result, royalty revenues actually turned negative in the 2009 fiscal year, even though the dollar value of potash sold from Saskatchewan remained higher than it had been in any year before 2007.

Of course, profits in excess of royalties are subject to corporate income tax. However, the Canadian government is slashing its corporate tax rate from 29 per cent in 2000 to just 15 per cent by 2012.

Between 2006 and 2008, Saskatchewan cut its rate from 17 to 12 per cent. Wholly or partially reversing these corporate tax breaks would give the public a more significant fraction of future potash profits.

The prospect of a PCS takeover underscores the folly of having privatized Saskatchewan’s crown jewel. Whether or not a takeover occurs, governments should strengthen their royalty and tax regimes to collect a fairer share of potash revenue for the public.

Erin Weir is a Saskatchewan expatriate working at the Canadian National Office of the United Steelworkers union, which represents most of Saskatchewan’s potash miners.

PCS Potash Mines (millions of KCl tons)

* Operated by IMC (now Mosaic) on contract with PCS.
Note: Due to rounding, the sum of mines sometimes differs slightly from the “Sub-Total” and “Total.”

            Prime Minister Stephen Harper’s Conservative government reached a $130 million out-of-court settlement with the bankruptcy trustees overseeing the restructuring of AbitibiBowater Inc., a failed forestry and paper giant.  The settlement relates to a claim that Abitibi brought against Canada under NAFTA’s notorious Chapter 11 process.  This process is a bizarre kangaroo court in which investors from one NAFTA partner (and only investors - normal people aren’t allowed in) can sue another NAFTA government for actions which are deemed to break NAFTA’s broad investment rights provisions.  If a Chapter 11 tribunal rules against the offending government, it can order damages be paid to the aggrieved investor.

            In its 15 years in existence, the court has interpreted those investor rights clauses very expansively.  Not just outright expropriation is prohibited and subject to penalty.  Any measure which is seen to impose an unfair or unjustified burden on the profitability of a company (whether it has anything to do with the nationality of the investor or not) can be considered “tantamount to expropriation,” and hence subject to penalty.

            In the AbitibiBowater case, the provincial government of Newfoundland and Labrador (led by feisty Premier Danny Williams, a Conservative) took back Abitibi’s timber and water rights in 2008 when that company abandoned its mill that processed wood from that tract.  The company laid off 800 people and destroyed the isolated community of Grand Falls in the process.  Williams’ move was both morally and economically justified: he said if AbitibiBowater wasn’t going to productively use those rights, someone else should have access to them.  The Newfoundland government offered to pay fair value for the real assets (including the plant’s hydro dam) caught up in the action, minus expenses for worker severance and environmental clean-up of the company’s abandoned facility.

            Indeed, today Williams stands by his audacious act, which was hugely popular in Newfoundland.  He recently said, “Of the many things that I’ve done … in government, this is probably one of the actions that I’m the most proud of.”  But Abitibi, predictably, raised a hue and cry.  But they didn’t complain to a Canadian court of law: what Williams’ government did was unusual, but hardly illegal.  Instead, they went straight to NAFTA’s kangaroo court.

            Since NAFTA is an international treaty, it is the federal government who speaks for Canada - even when the claim is directed against a provincial government.  Usually these Chapter 11 cases drag on for years.  Amazingly, however, Canada’s federal officials settled the case out of court this week.  They agreed to pay damages of $130 million, only 6 months after Abitibi formally filed its NAFTA complaint.

            There was no “national treatment” aspect to the seizure of Abitibi’s rights (it was Abitibi’s socially irresponsible actions, not its nationality, that sparked the Newfoundland action).  Indeed, Abitibi is functionally headquartered in Montreal, Canada, and is, for most intents and purposes, a Canadian company (its U.S. “identity” merely reflects a Delaware incorporation - no doubt for tax avoidance reasons).  This makes it all the more bizarre that it could use the NAFTA process (rather than normal courts) to sue its own government.  There should have been plenty of grounds to fight the case as a dramatic over-reaching of NAFTA’s rules (which in theory are supposed to protect one country from discriminating against investors from another country on the basis of their nationality).  Even if Canada eventually lost, it could clearly stretch the process out for years.

            So how do we understand the federal government’s utter and premature surrender, not even bothering to try to defend the Newfoundland actions?  Canada’s strange jurisdictional division of responsibilities comes into play here: it’s the federal government’s responsibility to defend Chapter 11 cases, and even foot the bills.  There is no constitutional way for Ottawa to force Newfoundland to pick up the tab - although Harper threatened this week to try to pass the buck to the provinces for any future Chapter 11 judgements against them.

            The federal government’s expensive white flag will certainly come back to haunt Canada in future Chapter 11 actions.  After all, more claims have been launched against Canada under Chapter 11 than any other NAFTA partner: 28 at last count, claiming total cumulative damages in excess of $14 billion.  (Mexico and the U.S. have each been hit with 19 cases, so far.)  The Abitibi settlement ranks as the largest Chapter 11 payout ever made by any North American government.  Ottawa’s capitulation will clearly encourage more companies to take aggressive action through the NAFTA kangaroo court, over any government action (nationally prejudicial or otherwise) seen to hurt business profits and the interests of any investors, whatever their nationality.

            The only conclusion we can come to is that the hard-line neoliberal Harper government actually wanted to pay this bill, and that’s why they didn’t bother fighting the case.  Naturally they hate the idea of governments taking economic matters into their own hands, like Danny Williams did.  They claim to want to send a signal to global investors that Canada is truly “open for business.”  (Unfortunately in my view, even Williams’ actions haven’t scared off the foreign mining speculators snapping up Canadian resource properties - the latest being the $40 billion takeover war for Potash Corp.)  And they don’t want the Abitibi squabble to interfere with their rush to sign new free trade deals with the EU, Korea, and others.

            Through Harper’s lens, then, $130 million is a small price to pay to reinforce Canada’s full commitment to free trade rules, and free trade ideology.  (So much for this government’s supposed preoccupation with reducing its deficit, at all costs!)  But for Canadians, the bill will only get bigger.  It will get bigger with every new, more aggressive Chapter 11 challenge filed.  With every potential legislation killed by the chilling effect of Chapter 11 (”We can’t do that, we’ll get sued under NAFTA.”).  And with every community that closes down because profit-maximizing foreign conglomerates have no compulsion to consider the social or environmental costs of their decisions - just the way the free trade architects want it.

            Canada should renounce Chapter 11 as an anti-democratic, distortionary, rent-seeking divergence from the genuine processes of trade and investment.  Canadians should be outraged at Ottawa’s $130 million giveaway.  If Abitibi had a genuine complaint, they should take it to a Canadian court (not this unaccountable, shadowy tribunal).  And instead of paying $130 million of taxpayers’ money to a bankrupt company with no promises whatsoever that it will ever create another job in Canada, here are just a few things the Harper government could have done with the money:

• funded the renovation and retrofit of 5,000 units of low-cost public housing - creating hundreds of construction jobs and alleviating the crisis of under-housing.
• funded 370,000 weeks of regular Employment Insurance benefits for Canadian workers (including forestry workers in Newfoundland) who are being thrown off the EI system every week when their benefits expire.
• funded 25,000 child care spaces for a year, creating 3000 or more full-time jobs for child care workers.

Pick your own way that a supposedly cash-strapped government should spend $130 million.  You’d be hard-pressed to imagine one more damaging to Canada’s democracy, independence, and long-run economic security than this one.

P.S.  For a full listing of cases filed under NAFTA’s Chapter 11, and decisions rendered, please see the excellent compilation prepared by Scott Sinclair of the Canadian Centre for Policy Alternatives.

http://www.policyalternatives.ca/sites/default/files/uploads/publications/National_Office_Pubs/2008/NAFTA_Dispute_Table.pdf

Scott is working on an update of this table (which currently includes all cases filed up to 2008), which will be published this fall.

The U of A ranks second in total research funding, behind only U of T and up from fifth in 2006. This year, the U of A will spend $514-million on research, more than double its total from a decade ago.

However, the article also hints at the other side of the coin (no pun intended):

 The funding comes at a time when the cash-strapped school is looking for cuts elsewhere – reports surfaced earlier this summer that it cut off phone lines for some professors this year to save money.

I think this second point is very important.  On the one hand, I note that Canadian universities put a lot of time and effort (as well as money) into competing with each other to attract more research dollars and prestige.  On the other hand, this is happening at a time when federal cash transfer payments to provinces for universities are decreasing substantially, student-faculty ratios are increasing very significantly, tuition rates are at an all-time high, and the average student debt load is much higher than it was in the mid-1990s. (I’ve written about this two-sided phenomenon here.)

Let’s face it: if a student can’t attend every class because they have to work three part-time jobs to afford tuition, if they can’t contact their professor because the professor’s  phone is disconnected, and if class sizes are too large for professors to take the time they need with their students, it doesn’t much matter that your university just inched its way one step closer to being home to the next Nobel prize winner!

I think Canada’s universities need less razzle-dazzle and more substance.

But having so many key people out of the office limited our response to BHP Billiton’s bid for the Potash Corporation of Saskatchewan. (Next time BHP launches a hostile takeover, it should better coordinate the timing with interested unions.)

Nevertheless, we got out a press release throwing down the gauntlet for BHP to demonstrate how the proposed acquisition would benefit Canadians. CEP, the second-largest potash union, has also issued a release. Today, we have the following op-ed in The Financial Post (page FP 11):

BHP Takeover of Potash Could Squeeze Workers

Last week’s hostile takeover bid for the Potash Corporation of Saskatchewan (PCS) should raise a red flag for Canadians. However, it is an opportunity for a national debate on the future of Canada’s potash industry, the continuing onslaught of foreign takeovers of Canada’s resources and industries, and the effectiveness of the Investment Canada Act.

PCS is simply the most recent Canadian economic jewel swept up in the relentless surge of foreign takeovers: Stelco, Xstrata, Inco, to name but a few. Canada no longer has a single major steel producer. In 2006 alone, foreign ownership of Canadian mining leapt to 48% from 12%.

PCS began as a Crown corporation, wholly owned by the people of Saskatchewan. The 1989 legislation privatizing the company prevented non-residents of Canada from owning more than 45% of the shares. In 1994, the Saskatchewan government removed this restriction. Although PCS remained a Canadian company, non-residents held just over half of its shares at the end of last year.

BHP’s bid would bring PCS wholly under foreign ownership. There are numerous reasons for Saskatchewan communities to be concerned about its bid, and governments’ unwillingness to protect Canadians’ interests.

BHP has mused about leaving Canpotex, the agency that has marketed Canada’s potash offshore for four decades. BHP may have enough clout to go it alone in world markets. But removing PCS sales from Canpotex would severely undermine that agency’s marketing and pricing power, to the detriment of Canada’s smaller potash producers: Agrium and Mosaic. With less capacity to negotiate high and stable prices for all Saskatchewan potash mines, provincial royalty revenues could be lower and more volatile.

Canadian workers and governments would also have less bargaining power in negotiating with a global mining giant. Currently, PCS generates two-thirds of its profits from unionized mines in Saskatchewan. As a result, Saskatchewan workers, the provincial government and the federal government have some leverage in negotiating the wages, royalties and taxes paid by PCS.

If the proposed $38-billion-plus takeover occurs, Canadian mines would account for more like one-tenth of BHP’s profits. In the future, BHP could credibly threaten to close Canadian operations to extract concessions from workers and/or governments.

This prospect is much like the unfortunate situation with Vale’s acquisition of Inco, which led to a strike in Sudbury that lasted 100 days longer than the longest Inco strike. Our union still remains on strike against Vale at Voisey’s Bay in Labrador, with the company employing replacement workers and refusing to accept the same settlement that was reached in Sudbury.

Unfortunately, Vale has been cited as another possible purchaser of PCS.

Recognizing BHP’s bargaining power after a takeover, Canadians should drive a hard bargain now in reviewing its bid. The Investment Canada Act gives the federal government extensive power to reject proposed takeovers that would not provide a “net benefit” to Canada. And a deal’s “net benefit” should be understood as more than just what windfall current shareholders might earn as competing bidders drive up stock prices.

Unfortunately, repeated Canadian governments have failed to effectively use this authority. Most foreign takeovers are rubber stamped. All are behind closed doors. Of more than 1,600 proposed acquisitions reviewed under the Investment Canada Act since 1985, only one was rejected. Of all the foreign takeovers, the government has only ever taken one foreign company to court for violating commitments under the Act.

Applications to acquire PCS or other major Canadian enterprises should be subject to thorough reviews, including meaningful opportunities for employees, their unions and the wider community to participate in the process. If such a review approved BHP’s takeover, it might be made conditional on BHP at least maintaining certain levels of employment in Canada and conducting its offshore potash sales through Canpotex.

Such commitments made under the Investment Canada Act should be public so that Canadians know whether or not they are being met and enforced. A major problem with Vale is that we still do not know precisely what promises were made when it bought Inco. As a result, the public has no means to ensure Vale lives up to any commitments it made behind closed doors. Let’s not let the same happen again.

The prospective foreign takeover of PCS is a major challenge for Canada. But it is also an opportunity to improve our policies for reviewing foreign takeovers and protecting Canadian interests.

Ken Neumann is National Director for Canada of the United Steelworkers union, which represents Canadian potash miners employed by PCS, Agrium and Mosaic.

My Gordon was very influential with me, and I know with many other independent-minded economists in Canada.  In 1998 he helped us found a network of economists determined to broaden the bounds of acceptable debate (which became the Progressive Economics Forum).  He attended many of our sessions, presented several papers, and always challenged us to be both policy-relevant and rigorous.  His work on electricity markets was especially influential with many of us in the trade union movement; we tapped his expertise in this subject several times in our long fight against energy deregulation and privatization.  He also wrote extensively on pharmaceutical policy and financial market structures.  He gave me important advice and comments on my first book (Paper Boom, 1999).

Like many left economists in Canada, I am personally and professionally indebted to My for his dedication, professionalism, and mentorship.  There will be a memorial service for him at the Rotman School on Sept. 11, 1:30 pm, on the 3rd Floor (105 St. George St.).  To attend this event, please RSVP either online at http://www.rotman.utoronto.ca/sept11  or by calling Jennifer Hildebrandt at 416-946-7462.  In lieu of flowers his family has suggested a donation (fittingly) to Doctors Without Borders.  Thank you, Myron, for your contributions to critical economics!

A million is the number of times this blog has been viewed since Marc started it back in the summer of 2006. It has been an eventful few years in Canadian economics: the commodity “super cycle,” financial crisis, Great Recession, swing from budget surpluses to deficits, etc.

I think that this blog has been modestly ahead of the curve in anticipating, and commenting on, some of those developments. “Tomorrow’s conventional wisdom, today,” “we told you so,” and “you read it here first” have become regular taglines.

One million seems like a significant milestone, but what does it actually measure? WordPress claims not to count views by those of us who post.

However, a reader could presumably view (i.e. click on) multiple posts in a single visit. On the other hand, some people probably read our posts in syndication on Rabble, New Democrats Online, etc. without being counted by WordPress at all.

So far, we have utterly failed to use social networking to promote the blog. The upshot is that there is still plenty of room to expand our readership.

To paraphrase Mötley Crüe:

When Marc started this blog
All he needed, needed was a laugh
Years gone by . . .
I’d say we’ve kicked some ass

“But the argument has become even stranger recently, as it has become clear that investors aren’t worried about deficits; they’re worried about stagnation and deflation. And they’ve been signaling that concern by driving interest rates on the debt of major economies lower, not higher. On Thursday, the rate on 10-year U.S. bonds was only 2.58 percent.

So how do austerians deal with the reality of interest rates that are plunging, not soaring? The latest fashion is to declare that there’s a bubble in the bond market: investors aren’t really concerned about economic weakness; they’re just getting carried away. It’s hard to convey the sheer audacity of this argument: first we were told that we must ignore economic fundamentals and instead obey the dictates of financial markets; now we’re being told to ignore what those markets are actually saying because they’re confused.”

It is a thoughtful piece, if somewhat predictable. But it leans on two important facts in an erroneous way. In both cases, my guess is that he is simply not aware of the facts, rather than making an outright attempt to be misleading.

First, he suggests that the time is long overdue for census information collecting to move firmly into the 21st century.

He probably does not know that the long form census questionnaire in 2006 was available on-line, as will be the National Household Survey in 2011. After all, only 20% of households would have had the option to answer these questions, in any form at all, last time round. Many households, though, still prefer to fill out forms in hard-copy; and many will still need face-to-face help, as we have heard in witness testimony at the Industry Committee hearing on July 27.

The considerable technological security/privacy issues related to on-line surveys that must, by law, provide full confidentiality were resolved in partnership between Statistics Canada and Lockheed Martin in the run-up to the 2006 Census. Lockheed Martin has been retained for a smaller role this time around.

The involvement of Lockheed Martin, the world’s biggest defence contractor, was the primary reason people in Canada (and the U.S., which followed a similar route) refused to fill in the census questionnaire.

Why was Lockheed Martin was chosen, out of all the private contractors available? The answer deserves and requires more time than I have today; but the point is that census refusniks in Canada did not fail to respond, as the government claims, because they found the state coercive, or the census questions intrusive. They refused because they thought Lockheed Martin was going to be privy to their information. The Lockheed Martin name is undoubtedly a red flag to some, and reasonably so. Turns out it is also a red herring. Statistics Canada takes its duties around confidentiality very seriously. Indeed, it’s known to be a bit of a fetish around the agency. (As fetishes go, this one makes me a little more at ease than not!)

Secondly, Dr. Flanagan raises an important issue regarding response rates among First Nations peoples. He notes, rather derisively, that the response rate is rising, and dramatically so. He does not provide any context or history behind this trend.

It is in large part due to the patient and ongoing process of mutual listening that has been taking place among many (but not all) First Nations, Inuit and Métis communities and Statistics Canada. There has been long-standing antipathy between some First Nations communities and the government, with the census issue falling into a broader “get off my lawn” positioning. But there is also a growing understanding that these data can be put to good use, both within these communities and with others. Indeed, there is precious little systematically collected information other than that derived from the census long form questionnaire about these communities.

The fact that the census is still developing as a reliable source of long-term data for and about these communities is a good sign, not a weakness. Both the process of census-taking and the nature of the questions have changed over time, for these Canadians and for the rest of us. (I provided a link to the fascinating history of the Canadian census in an earlier post.) The iterative nature of this process with First Nations, Inuit and Métis people is still a slow and evolving dance. What everyone involved understands is that, without this information, we have no comparable data between our first nations peoples and the rest of Canadian society; and it is critically important to gauge the progress of all Canadians, particularly those who have been given such a raw deal for so long.

However, annual inflation rates are not the best measure of the HST’s impact on consumers. Statistics Canada also released data on monthly price changes, allowing us to compare June (just before the HST) to July (with the HST).

Between June and July, the national consumer price level rose by 0.5% (0.6% adjusted for seasonality). Consumer prices jumped by 0.9% in Ontario and 1.1% in British Columbia.

Nova Scotia increased its sales tax in July, but the remaining seven provinces comprise a control group. Consumer prices ranged from a decrease of 0.3% in Quebec to an increase of 0.5% in Alberta.

Adding up the seven provinces according to their Consumer Price Index weighting indicates an average price change of 0.0% between June and July. Since average consumer prices were flat in the rest of Canada, the HST appears to be wholly responsible for the 0.9% increase in Ontario and the 1.1% increase in British Columbia.

HST advocates argued that the consumer impact would be mitigated by businesses passing through input tax credits as lower pre-tax prices. For example, TD Economics predicted that the HST would increase consumer prices by only 0.7% in Ontario and British Columbia. But today’s numbers showing larger increases indicate that businesses have not (yet) passed their input tax credits along to consumers.

Implications for Monetary Policy

The Bank of Canada has appropriately promised to ignore one-time tax changes in formulating monetary policy. For the next eleven months, annual inflation rates will be comparing post-HST prices with pre-HST prices.

Therefore, headline inflation rates will be significantly above any underlying trend. These misleadingly high inflation rates should not be used to justify higher interest rates.

UPDATE (August 22): On Friday, I appeared on CBC News Network to discuss this topic. My panel starts 14 minutes into this video. (At 16:40, I felt like something was caught in my throat. Fortunately, I had a glass of water that allowed me to recover.)

The selection of the latest Governor General of Canada has been described as one such rare example.

The process of selecting the Governor General was, notably, an invention of the Prime Minister.

Creative and well-suited to the serious task at hand, Harper’s chosen approach took political hands off the wheel, both in optics and in substance.

He named a committee of six eminent persons, each of whom understood the nature of the office and duties of the Governor General: Kevin MacLeod, Usher of the Black Rod and Canadian secretary to the Queen; Sheila-Marie Cook, secretary to the Governor-General; Father Jacques Monet of the Canadian Institute of Jesuit Studies; Christopher Manfredi, dean of the Faculty of Arts at McGill; University of Calgary political scientist Rainer Knopff; and historian Christopher McCreery, private secretary to the Lieutenant-Governor of Nova Scotia.

They were charged with developing a short list of candidates for the consideration of the Prime Minister, who would – as is the tradition – provide his advice to the Queen who would – as is also the tradition – appoint Canada’s new Governor General on this advice.

The selection committee consulted with over 200 people as to who best would fit the requirements of the office in today’s politically charged environment. Among those approached were premiers, former prime ministers and the two leaders of the opposition who address themselves to the issues of the Canadian state as a whole – Michael Ignatieff and Jack Layton.

At the end of this process, the name at the top of the short list was David Johnston – dean of law at University of Western Ontario, long-time principal of McGill University, former president of University of Waterloo, and one of Canada’s most respected advocates for higher education. Harper chose Johnson and his acceptance of this tacit recommendation set off broad-based murmurs of approval.

The importance of this course of action for decision-making cannot be overstated, for three reasons: 1) the high regard with which the current office holder, Michaelle Jean, is held; 2) the unusually important role the Governor General has played in state affairs in the past two years, acceding to the request of the Prime Minister to prorogue Parliament twice in as many years; and 3) a minority government that has mostly governed as if it holds a majority of seats, producing fractious politics in the wake of unusually bold measures and frequent episodes of brinksmanship.

The census affair is emblematic of just this type of maverick behavior, and would benefit from a show of statesmanship by the Prime Minister just about now.

On July 21, three weeks after the Government’s quiet announcement of the decision to replace the mandatory long-form census questionnaire with a voluntary survey, Chief Statistician Munir Sheikh quit. He submitted a sober and elegant letter of resignation to the Prime Minister, who appointed him, and to whom he is accountable. Within hours, the Minister responsible for Statistics Canada, the agency, responded with a short and resolute statement, which could be summed up as saying “Thanks. Next.” It finished thus: “Until a permanent successor can be found Wayne Smith, Assistant Chief Statistician, Business and Trade Statistics, will act on an interim basis.”

A month has passed. The time has come to find that permanent successor to Munir Sheikh.

The process chosen by Prime Minister Harper to select the next Governor General of Canada would be an appropriate model to select the next Chief Statistician of Canada.

It is, in fact, very close to the process suggested by former Chief Statistician, Ivan Fellegi, almost immediately after Munir Sheikh’s resignation.

A group of eminent persons, both national and international, with thorough knowledge of the role of a statistical agency, could provide a highly transparent and visible search process to re-establish the integrity, authority and independence of Statistics Canada.

The committee should include representation from the National Statistics Council, the Statistical Society of Canada, and from an international body that relies heavily on statistics, such as the OECD or UN. It could lean on former Clerks of the Privy Council or Governors of the Bank of Canada, all of whom need census data to do their work. Dr. Fellegi, himself, would be a great choice too, given his unimpeachable credentials, international standing, and over 50 years of service with Statistics Canada, over 20 years of which were as Chief Statistician.

A good selection process would be a solid step towards resolving what has turned into a drama of Shakespearian proportions, a Midsummer Night’s Nightmare for politicians and everyday Canadians alike. It should be launched immediately. And Stephen Harper should be the one to announce it.

As an aside, the media focus excessively on the ups and downs of the stock market. But bond markets are at least as accurate a barometer of capitalist sentiment.

 If we listened to the bond market it would be saying something close to ‘CAPITALISM IS  DOOMED!!!!’  Hyberbole? Perhaps not. As of today or at least the last few days yields on goverment bonds for core capitalist countries have fallen to all time historic lows. A Government of Canada ten year bond yields less than 3% (2.94%) well down from 3.7% in April. US and German 10 year bonds yield even less, and the Japan yield is just under 1%. Even the UK - with the biggest deficit in the G7 - is paying just under 3% on ten year bonds. (Data from Bloomberg.). Smaller countries with big debts are still in trouble but even the PIIGS countries can borrow for much less than a few weeks back. If you assume that central banks are committed to inflation targets of about 2%, the  bond market is saying that you should be happy to get a pre tax rate of return of under 1% on a long term ten year or even longer term investment. Big investors - banks, pension funds etc. - are apparently snapping up long term bonds simply to preserve capital in real terms.

The apparent goal of mere preservation of capital over a long term horizon suggests that capital thinks that we are on the verge of a deflationary crisis, in which case low nominal returns become positive, and/or nominal GDP growth will be very low meaning that equities are very over valued even if they have only modestly recovered from Great Recession lows. In either case, the level of pessimism is stunning. If financial markets are even remotely right and the real rate of return on capital over the next decade is going to be in the range of 1%, then the implications in terms of the underlying dynamism of the system become quite stunning. If the real growth rate for advanced capitalist countries is south of 1%, then we surely face severe secular stagnation, rising unemployment, massive crises of retirement systems  etc etc.

An entirely plausible alternative is that the financial markets have become way too pessimistic, and that a bond market bubble exists which will be unwound.  Smart money might cash out and push interest rates back up. But the fact of the matter is that financial capital seems to be shifting in a big way from equities to soveregn bonds with exceptionally low returns. The capitalist financial markets are effectively saying thst capitalism has a very dismal future, and they may well be at least haf right for once.

If they are right, then the markets are acutely schizophrenic. Bond markets only a few weeks ago demanded fiscal austerity and then became terrified of winning what they had demanded in Europe, at the G20 Summit in Toronto, and in the US  Congress. Fiscal austerity is, in their judgment, derailing the recovery. The markets got what they demanded, and recoiled at the results.

Such are the contradictions in play today, and who knows what tomorrow holds in store.

Everyone wants to see and not be seen.  That’s getting less possible, even for the most guarded individual.

Today’s zeitgeist is Google, and the Google Zeitgeist is transparency.  The push-back  — and every thesis has its antithesis, as all you Hegel fans out there know –  comes from both governments that want to clamp down and control information flows (See  China or India vs. RIM……or Canada vs. Everyone on the census and access to information),  and individuals who want to control who sees what about them.

On the wider implications of all this sharing of information, here’s Kevin Kelly (founder and editor of Wired Magazine) talking about where the web will take us in the next 5,000 days. Twenty minutes well spent if you haven’t already seen this superb TED talk.  Kelly walks us through the evolution of how we collect, share and use information, and how that is changing our lives and even the way we think.

The Harper view of privacy, as evidenced through the census decision, is so last century.

But there are real trade-offs between privacy and the desire for information, at both the individual and collective levels.

That’s in part what politics and the democratic process should provide - a way to strike the balance between the benefits and demerits of a Brave New[ly Transparent] World.

Spoiler alert: the balance does not get struck by decree.

I spent Tuesday at a conference at Queen’s on said subject which was held under Chatham House rules for no particularly good reason, so no attributions.  But here are a few things I learned.

I was reminded just how extraordinarily decentralized is the Canadian state even within the world of federal states.  The provinces occupy almost all of the major tax fields and then some,  have relatively modest dependence on transfers from the federal government (just 19% of their revenues, and just 15% of combined provincial/local revenues) , and very little conditionality is now attached to those transfers with the Canada Health Act being the major possible exception (and it has not been applied for many years.) If you tally up provincial and local spending (and local governments are creations of the provinces) it comes to about 70% of total government spending. The federal share of total tax revenues is, at 45%, greater than their share of direct spending which is only about one third of the total once transfers to provinces and local governemnts are netted out.

As I have noted before on this blog, much has been made of the fact that the Eurozone is in crisis because it has a common currency but no common fiscal policy. The same is true of Canada.  Ministers of Finance meet and the federal Minister sometimes nags the provinces - almost always for alleged profligacy - but whether provinces run surpluses or deficits is pretty much up to them.  That’s probably a good thing today with the feds leading the call for austerity, but there is a downside in that provinces running large deficits (notably Ontario) or facing large accumulated debts (notably Quebec)  do pay a significant interest rate spread compared to the federal government. It is very much a moot point if there is an implicit federal guarantee on provincial debt, or if there is any residual power to intervene in provincial fiscal policy (note that Alberta’s  Depression era Social Credit legislation was struck down.)  Basically provinces which want to maintain and improve services face ‘market discipline” and get only modest help from the feds, so must raise taxes or run deficits.

Federal transfers are, of course, still very important, totalling over $50 Billion this year, not counting special stimulus measures.  Equalization ($14 billion) is increasing in line with nominal GDP while the CHT (Canada Health Transfer) is $24 billion and growing to 2014 by 6% per year. Other transfers are growing more slowly.

The key issue in fed-prov relations is what happens to the CHT in 2014. While it now pays for only a modest share of total provincial health spending, such spending now makes up the majority of provincial spending and is growing more rapidly than the tax base.  Fiscal hawks would like Flaherty to back up the austerity message and reduce the federal deficit faster by limiting the growth of transfers - but I am prepared to bet heavily that there will be no announcement of any kind of policy this side of an election. I am also prepared to bet heavily that the (ambiguous) promise by Flaherty not to cut transfers will not survive for long, especially if the Conservatives get a majority. The message to the provinces will be to cut health care costs by privatizing delivery and by imposing various user fees, at which point the whole issue of the Canada Health Act and its injunctions against fees for physician and hospital services will come into play.

Another significant aspect of Canadian fiscal federalism is that we equalize revenues up, not down.  Combined with the unequal distribution of resource revenues, that translates into very significant differences between the provinces.  Alberta’s tax effort is less than 80% of the national average but spending per capita is well above the average. Ontario spends only 95% of the national average per capita but faces a very large deficit. Quebec spends significantly above the average to fund its pharma and child care programs among others, but also taxes well above the average. Yet almost nobody is prepared to talk about greater sharing of resource revenues to ease the fiscal problems of  all provinces east of Saskatchewan.

If the Prime Minister and the Finance Minister know that it’s not time to start focusing on balancing the books, they’re not acting like it.

In the run-up to the G8/G20 in June and since, the Harper team’s message box has focused on cutting deficits and paying down debt. For months they have characterized these as the two leading public policy objectives for Canada and the rest of the developed world, less than two years after the broadest and most sudden economic crisis to rock the global system since the 1930s.

Indeed, just a few days ago Finance Minister Jim Flaherty bragged that Canada was punching above its weight, shaping the world’s response to the post-crisis world by scuttling global bank taxes; and leading by example, using the rebound in Canadian stock markets, GDP, exports and jobs to show the rest of the world how to launch a cobra-quick attack on deficits.

Today Paul Krugman weighed in. Speaking at a conference of lawyers, he reminded his audience that government balance sheets are only part of the problem going forward.

Household budgets are a bigger part of the economy, and re-balancing them will take a lot longer if governments prioritize putting their own fiscal house in order first. On this front, Krugman notes, Canadians have little reason to be sanguine about what happens next.

Though our labour market did not lose jobs for 27 long months as in the U.S., he reminds us we have one of the worst debt to income ratios in the world.

In fact Canadians have the worst debt to income ratio of 20 OECD nations.

He went on to deliver this shocker: today Canada’s household savings rate ($2.80 on every $100 dollars of household income) is less than half that of the U.S. ($6.40 on every $100). He said that’s the first time this has occurred since the 1970s.

(As an aside, the Globe and Mail article on this topic did not cover this aspect of the speech. This is taken from the Toronto Star’s account.)

The message about how exposed Canadians are, and which balance sheets need to be balanced first, is one worth repeating. Indeed, we at the CCPA have been repeating it since last April, with the publication of Exposed: Revealing Truths About Canada’s Recession.  By any historic standard, this is no routine recession.

Here’s a sobering factoid that takes Krugman’s shocking comparison even further: You actually have to go back to 1938 to see Canadian household savings rates this low.

In 1992 (where we are now in the cycle, two years after the economic crisis began) the national savings rate stood at 13%. At that time the Bank of Canada’s prime rate was 7.5%, the average 5-year mortgage commanded a 9.5% rate of interest, and a second decade of assault on middle class earnings was yet to begin in earnest.

That was then, this is now.

Interest rates are at historic lows, lower than even when the Bank of Canada was first put into place, in 1934. That means it is easier than ever to borrow and less attractive to save. But that ignores a bigger truth: it’s getting harder to save., and not just for the poorest among us.

Unremitting increases in the costs of housing, education and transportation while incomes are stagnant (or worse) means it may take a long time for savings rates to climb.

Rising debt levels since the crisis began is one obvious indication of how hard this is going to be: In the fall of 2008, before the crisis hit, Canadians owed $1.40 owed on every dollar of disposable income. That broke all previous records. At last count (1st quarter of 2010), the average Canadian household owed $1.47 on every dollar they took in.

Krugman reminds us of what we all know: interest rates have nowhere to go but up. Indeed, it’s a fine balancing act, leaving behind an era of easy money, and making ends meet.

Hope someone on Team Harper is listening.

First, as part of my doctoral dissertation research, I was trying to get ahold of (time series) social assistance statistics for all 10 Canadian provinces, namely social assistance rates and caseloads, going back to the mid-1980s (not exactly ancient history!).  A social policy wonk I happen to know put me in touch with a former HRSDC employee who literally had to dig up hard copies of documents in a basement to help me out.  After dusting them off, I asked: “Doesn’t Statscan have all of this data?” The answer was no.  In fact, they wouldn’t even be able to provide it to me for a fee!

More recently, I’ve come across a 2010 Statscan publication that provides a very detailed look at salaries and salary scales of full-time teaching staff at Canadian universities.  Thanks to this data, any member of the general public can very easily see, for example, that the median annual salary of a full professor at the University of Toronto is just over $156,000.

Call me a cynic, but this makes me suspicious.  If more members of the general public knew how little social assistance recipients make, this would certainly cause some awkwardness for members of senior levels of government. (For what it’s worth, and not counting child benefits, a single adult without dependents on social assistance in Ontario now receives approximately half what they would have received in the mid-1990s, in real terms.) Such knowledge in the hands of the general public would likely put some added pressure on senior levels of government to spend more on anti-poverty efforts.

Yet, one can sensibly conclude that senior levels of government would be quite happy to have members of the general public know what tenured university professors make as salaries. (In fact, Mike Harris was so eager to have members of the general public know what senior public servants make that he brought in the Public Salary Disclosure Act in 1996.)  Such knowledge in the public domain certainly has the potential to take some pressure off of senior levels of government to increase funding to universities.

All of this raises a fundamental question for me: just how political is Statscan?

RESOLVING THE CENSUS DEBATE
Welcoming the Changes Announced on August 11th

The National Statistics Council, the senior, external advisory group appointed by the government of Canada to advise the Chief Statistician, has noted the Government’s announcement that it intends “to remove threats of jail time for persons refusing to fill out the census” and its recognition that the voluntary National Household Survey will not meet the requirements for robust and accurate small-area data (e.g. data related to the use of Canada’s Official Languages) that can only be provided through a mandatory instrument.
The Council supports these developments, and is gratified that the government has acted in a manner consistent with suggestions about removing jail time outlined in the Council’s July 25th statement Seeking Solutions. International experience with mandatory censuses and surveys has shown that success can be achieved without the threat of jail.

Resolving the Issues by Listening to Canadians

While the initial decision of the government was taken without public consultation, the debate and discussion since the decision was announced have been illuminating. Many groups have explained the importance of the long form for their activities. They have brought to the attention of the government many facts that the government may not have known given the initial lack of consultation.
The public debate and the testimony at the Standing Committee, as well as the information released by the government yesterday in response to the order of the Standing Committee, have made the situation clearer and have demonstrated that:

All expert statistical advice, as well as the results of the recent U.S. survey experiment, concurs that a voluntary survey will not be able to fulfill the fundamental needs of a national statistical system in terms of accurate data for small-area needs, or for the benchmarking needed to ensure that other Statistics Canada surveys accurately represent the Canadian population.

The cost of changing the long-form part of the census into a survey is substantial — $30 million or more — while yielding less accurate or usable information.

While there has been recent discussion that small-area data users such as public health planners, voluntary associations, towns, highway and transportation designers, and many more should pay for their own surveys instead of relying on the census, this is not possible. For the same reason, non-response bias, that a voluntary replacement for the long-form census will not yield accurate results with a 50% - 70% response rate, private surveys will be totally unacceptable with their 10% - 15% response rates. (Again, their low response rates can be adjusted to be more accurate reflections of the whole population, but that requires the benchmarking from the long-form which will no longer be available.)

The Government’s Announcement Can be a Path to a Widely-embraced Resolution

The government’s announcements provide a welcome point of departure for an urgently needed fresh look at the issues and the crafting of additional initiatives that will protect and enhance the Canadian statistical system, ensures privacy, serves the Canadian public better, and reduces costs.

In the short term, we believe that there is an opportunity by making the National Household Survey compulsory to:

Save significant sums of money.

Reduce respondent burden on Canadians as the number of people asked to complete the long-form will be reduced from 30% of the population to 20%.

Provide the accurate benchmarking information needed to ensure that Stats Can and other data users – public, voluntary or private – can gather subsequent information.

Give vital information needed for small area or neighbourhood uses, including housing, health and transportation planning.
The National Statistics Council is eager to work with the government and with Statistics Canada on an urgent basis to achieve these important short-term goals.

Looking to the Future

The National Statistics Council believes that there are important ways in which the census and the statistical system can be improved for all Canadians. While these are not subject to the same time pressure as the current decisions about census content and form, they should be addressed in the coming year.

The National Statistics Council recommends that over the next year:

1.Statistics Canada consult widely and examine the process for deciding what questions merit inclusion in each census. While a suggested set of criteria was set out in the Council’s Seeking Solutions, the important goal is to make the process transparent and the need clearly demonstrable.

2. The opportunity afforded by amending the Statistics Act be used to include provisions related to the UN Fundamental Principles of Official Statistics, a code adopted by the UN and to which Canada has already formally adhered.

3.Statistics Canada examine the respondent burden placed on Canada’s farmers by the Census of Agriculture and other agricultural surveys from Statistics Canada. This review would look at collection techniques, search for ways to reduce the volume of questions, and consult with farmers about their need for data.

The National Statistics Council stands ready to assist the Minister and Government in using the recent focus of public interest in the census to enhance Canada’s system of national statistics so that it meets the contemporary and emerging needs of Canadians.

Ian McKinnon,

Chair, The National Statistics Council

First, while Mr. Usher is correct in arguing that more Canadians have been going to university in recent years (in spite of rising tuition fees), there remains the looming problem of rising student debt.  Indeed, according to the Canadian Federation of Students, average student debt for a four-year degree in Ontario has increased by 350 percent—from $8,000 to over $22,000—in the past 15 years.  Personally, I’m concerned about what the implications of this rising personal debt will be for young households.  Mr. Usher does not raise this matter in his posting.

Second, when governments target social spending to specific groups, those very programs then become vulnerable to future cuts.  In a 1998 article in the American Sociological Review, Walter Korpi and Joachim Palme argue that

surveys have shown that universal and encompassing programs receive considerably more support among citizens than do means-tested or income-tested programs (Korpi and Palme, 1998:  682).

Such “coaltion formation” (a term used by Korpi and Palme) increases the likelihood of a social program surviving over the long term.  For example, in spite of fiscal belt-tightening throughout OECD countries since the early 1970s, industrialized countries have seen very substantial increases in both pension coverage and health care spending.  Targeted programs, by contrast (think social assistance and social housing), have not.

In other words, in a political vacuum, Mr. Usher makes some sense.  But in the face of political realities, his proposal runs the risk of being unsustainable over the long-term.

Third, it’s worth checking out a 1999 article in Policy Options by Carleton University economists Nicholas Rowe and Frances Woolley.  In the article, they argue that targeted social programs

are both unfair and inefficient.  Unfair because if Canadians decide people shouldn’t have to bear the entire cost of raising children, having a hip replacement or acquiring an education, their exemption from cost shouldn’t vary according to their income.  Inefficient because clawbacks add to the effective marginal tax rate faced by the recipients of social programs, thus increasing the distortion of their work, leisure, investment and saving choices.

Here are the top notes of the last 10 days, ending in a fascinating and uniquely Canadian lesson in politics. It is neither the short nor long form of the census questionnaire that has taken this story to a new level. It is, rather, the newly elongated short form….the medium form.

August 3 – Parallel Universe Logic Stockwell Day articulates the first rift valley in Government logic on the census [mandatory short form good, mandatory long form bad, but mandatory anything requires penalties for non-compliance – jail or fines – to which idea the Harper team has developed a sudden and nasty rash] and riffs on the rise in unreported crime statistics [‘nuff said].

August 4 – If you can’t stop it, kill it. Treasury Board President Stockwell Day muses openly about scrapping a long-form questionnaire altogether, and speaks of other ways to collect and integrate pre-existing [administrative] data, which is specific to individual histories.  There is no reference to privacy issues.

August 5 – Know Thy Enemy. Industry Minister Tony Clement (responsible for Statistics Canada) states critics of the census decision are ticked off because it’s the end of a “free ride” for their data needs. “They got good, quality data and the government of Canada was the heavy. We were the ones who were coercing Canadians on behalf of these private businesses, or other social institutions, or other governments and provinces, for this data. We were the ones threatening Canadians with jail times or with large fines.”

August 5 – Know Thy Enemy, Part II. La Fédération des communautés francophones et acadiennes du Canada files for an injuction to stop the distribution of the long-form questionnaire as they launch two other legal actions: a charter challenge, and a suit over the Government’s violation of its own responsibilities to the French-speaking peoples of Canada under the Official Languages Act.

August 6 – Harper Emerges. The Conservative Caucus winds up their summer retreat and Harper finally speaks after a month-long absence, but refuses to take questions about the census.

Also August 6 – No Provincial Fix. The Council of the Federation ( the premiers of the provinces and territories) end their annual meeting without a united front on the census issue, which some commentators note falls along ideological lines. Ed Stelmach of Alberta and Gordon Campbell of BC are OK with the feds doing what they want, though they don’t necessarily want to have the provinces pick up the slack. In contrast, Cities of Calgary, Edmonton, and Red Deer in Alberta and the Cities of Victoria, Metro Vancouver, North Vancouver, Burnaby, Abbotsford, Kelowna, Kitimat, as well as various districts in B.C. are dead against the move away from a national mandatory census.

August 7 – From the Department of Ouch. The redoubtable Sylvia Ostry slams the Government over its census decision. It means something when yet another former Chief Statistician, former head of the Organization for Economic Cooperation and Development, and key senior bureaucrat advising the Conservatives during the free trade fights calls the decision “shocking” and “ridiculous”.

August 9 – The Train Leaves the Station. The new voluntary long-form questionnaire that replaces the mandatory long-form census questionnaire, the National Household Survey, goes to the printer. The impression given is that the deed is done, the census decision is irreversible. It is not. The NHS has almost all the same questions as the 2006 Census long form questionnaire, with the exception of those dealing with unpaid/household work. Only 33% of the nation’s households (not people) will receive it. They will also receive, along with the other 67% of Canadian households, a mandatory short-form questionnaire, which enumerates our population and provides the most basic demographic and geographic information. There are lots of ways to communicate what is to be done with both forms when the time comes.

August 9 - Harper Doth Speak. Breaking his 35-day streak of silence since the census volcano erupted, Harper finally speaks, reinforcing but one central idea from the Conservative message box: that governments should not threaten and jail citizens for non-compliance with the Statistics Act, i.e. not filling out a census form. [“I know some people think the appropriate way to deal with that is through prosecuting those individuals with fines and jail terms,” said Mr. Harper. “This government will not do that. In this day and age, that is not the appropriate way to get the public’s co-operation.”] The biggest Mack Truck of Policy Implementation proceedeth.

August 10 – Worth Repeating. The Conservatives provide correspondence leading to the decision on the census between Statistics Canada, Industry Canada, the Minister’s Office, PCO, PMO, and Cabinet, as requested by members of the Industry Committee at the July 27 meeting. They break with tradition (what else is new) by releasing it to the press before giving the materials to the Clerk of the Committee. (This protocol is in place so everything can be translated and circulated to all members of the committee in both official languages before it is discussed.) Much is redacted/blacked out, but a revealing peak at how Cabinet works is included.

August 11 – Legal Pressures. The Federal Court fast-tracks the FCFA charter challenge, rejecting arguments by the Government’s lawyers that they wouldn’t have time to marshall their case by mid-September.

Aug 11 – Dodging the Bullet. Within hours the Harper Conservatives add two more questions on language to the mandatory short form census questionnaire that were originally on the long-form questionnaire. This may render the court challenges by FCFA moot .  (It depends on what interpretation of the Charter they might have been aiming for, and if these data fulfill the requirements of the Official Languages Act). If so, there will be no court showdown in mid September. The Harper Conservatives announce at the same time they will table legislation in the fall session to eliminate jail sentences for non-compliance with the mandatory requirement to fill in Census questionnaires.

Clement has suggested that the new Chief Statistician at Statistics Canada has shown the way forward. (Hint: it’s the same as the advice from the “old” Chief Statistician – if you want to be able to rely on it for official purposes, the data collection has to be mandatory, i.e. counting everybody, not just those who feel like answering)

As the short-form questionnaire starts starts getting longer, a wag in my circles has asked: Does this make the short form the medium form?

And of course that leads to a classic Canadian conclusion – the medium [form] is the message.

Indeed the message is that the Government of Canada has legal obligations to its citizens, a whole raft of them that depend on knowing who and where their citizens are, and what kinds of circumstances they face in their daily household and working lives.

Here’s the list of Federal Legislative Census Requirements listed in the first appendix to the undated memorandum to the Cabinet on the census issue provided by the Harper team, in response to the request for relevant correspondence by the members of the Industry Committee. These are all the ways in which the federal government requires census information to carry out its statutory obligations to the people, subsidiary level governments and institutions of Canada.

The francophone group launched its injunction based on its court challenges to the Canadian Charter (minority rights) and the Official Languages Act (particular articles protecting the French language).

Perhaps the coming days will see more court challenges launched in defence of both minority rights and the statutory provision of programs, services and protections.

Whether Aboriginal populations or seniors, the unemployed or veterans, students or immigrants, the poor or the disabled, there are plenty of other groups who rely on the info from the long-form questionnaire to insure their statutory rights are met. And answers from a 20% sample of Canadian households need to be mandatory if governments dedicated to meeting their legal obligations and a public dedicated to holding them accountable to that end can do their jobs properly. Such information is the only counterweight we’ve got to the natural drift of governments serving primarily in the interests of those who have never had a problem getting their interests served.

Neither the short form nor the long form, the story behind the “medium” form is, indeed, the message: It’s the democracy, stupid.

Recently, I was pleased to see Dr. Boan zing the Harper government with a couple of letters to the editor. He had one in Friday’s Globe and Mail (the same day as my census letter) and another in Saturday’s Regina Leader-Post.

Resisting justice
The Globe and Mail, August 6, 2010

What’s going on? It seems that the federal government is determined to persecute U.S. war resisters, such as Jeremy Hinzman, whose case is headed for a new hearing after the Federal Court of Appeal ruled in his favour (Federal Directive Toughens Stand On U.S. Deserters Living In Canada Aug. 4). This despite the fact that two motions, on June 3, 2008 and March 30, 2009, calling on the government to cease deportation proceedings against U.S. Iraq war resisters, were passed by the House of Commons, to no avail. It is to be hoped that Bill C-440, which has been introduced by Liberal MP Gerard Kennedy to give those two motions legal weight, will get through the House and make a difference.

At least one poll, taken by Angus Reid in June, 2008, found that 64 per cent of Canadians favoured allowing war resisters to stay in Canada. Of course, the House could be prorogued again, thereby killing the bill and thwarting the will of the majority of Canadians. The whole sad story is a disgrace of gigantic proportions.

The government is turning its back on the Christian tradition we inherited from Britain of welcoming refugees of all kinds.

Jack Boan, Regina

Thinking clouded by ‘Bozone’
The Leader-Post, August 7, 2010

Are politicians stupid? Or do they say stupid things to make us think they are, and thereby curry favour as being “one of us”, namely, “a good old boy”? What made me wonder was Stockwell Day’s reported statement that we need more jails because of the increase in unreported crimes. The absence of logic in the statement beggars description. (How can unreported crimes increase or decrease?)

The Washington Post may have the answer. According to columnist Jack Knox, (In Palin English, Aug. 4 Leader-Post), that newspaper runs a contest each year, in which readers are asked to take a word from the dictionary, alter it by adding, subtracting or replacing one letter, and provide a definition.

The one that seems to fit our purpose is Bozone - the substance surrounding stupid people that stops bright ideas from penetrating. It fits if you think of the substance Bozone as being ideology. The latter even prevents facts from penetrating. Thus we have the answer: politicians are not stupid at all. The ones that appear to be stupid are merely surrounded by Bozone.

Jack Boan, Regina

There may be something in this. However, the figures in the Globe story do show the July education job losses to be much bigger - to the tune of 40,000 - than last year . Also, I checked the numbers for September 2009 and September 2008 and found no huge jump in education employment from August to September in either of those years (up 8,000 in 2008 and up 18,000 in 2009.)  A repetition of that level of re-hiring come September would still leave the minus 60,000 hit  in July as a big net loss.

My guess - to be rechecked in the Fall - is that there have been a lot of permanent layoffs in the post secondary sector.

The main point he makes in today’s column “New Economic Order Demands New Attitude” is accurate if familiar - Canada participates in the global economy primarily as a commodity producer and importer of manufactured goods from “workshop countries”. (I can’t find the link on the Globe web site.)

But he makes a real blooper in his effort to laud the merits of being a resource exporter in a world where manufacturing production is shifting to China. He states that “Canada is the only G8 country to consistently achieve current account surpluses.”

That is just wildly wrong. Germany and Japan have consistently run HUGE current account surpluses for at least the past decade (about 6% and 3% of GDP respectively in 2010), and French and UK deficits on current account are quite modest. Meanwhile, Canada’s current account went into deficit into 2009, and was not especially large before then compared to those of Germany and Japan.

The performance of the labour market in July 2010 was catastrophic. The unemployment rate is back up to 8.0%. The number of full-time jobs in Canada decreased very rapidly in July, when 139,000 full-time jobs were eliminated. The number of permanent employees fell by even more, by 144,400.

Full-time job losses were offset by a shift to part-time work (+129,700). One worker out of 5 now works part-time, the highest proportion ever recorded since data have been collected (1976).

Overall, a total of 9,300 jobs were eliminated in July, the first decrease in employment since the beginning of 2010.

There are still more than 250,000 fewer full-time jobs today than at the beginning of this “Great Recession” in October 2008 (-266,200).

The long term unemployment rate remains high. The percentage of Canadians who have been unemployed for more than 6 months was 22.5% in July, the highest level of long term unemployment observed since the jobs crisis started in October 2008. Before the crisis, the long term unemployment rate was around 12%.

The real unemployment rate, a rate that includes discouraged workers and involuntary part-time workers, was 12% in July 2010, a rate considerably higher than what was observed in October 2008 (8%). There are still 355,000 more unemployed Canadians today than in the fall of 2008

Jobs were eliminated last month for both men and women, in almost all age groups and concentrated in the service industries, especially in educational services (-65,300). Manufacturing is up this month (28,500), but remains near its record low level.

These appalling job numbers clearly show the folly of ending stimulus measures to support an economic recovery which has been cast in doubt. Special EI measures end in Septmber, and the infrastructure investment program ends next March.

Employment was somewhat lower in July, among both employees and the self-employed. Far more significant than the overall decline in employment was the replacement of 139,000 full-time positions with 129,700 part-time positions. The revelation that so many existing jobs are part-time may help explain why total work hours decreased even as employment rose in June.

The modest employment loss, combined with modest labour force growth, increased unemployment by 17,900. July’s increase in unemployment was mostly concentrated in central Canada, which had posted lower unemployment in June.

Total unemployment is now even closer to 1.5 million. The continuation of high unemployment underscores the need to renew the five-week extension of Employment Insurance benefits, which is set to expire in September.

Manufacturing was the bright spot in today’s numbers. It gained 28,500 jobs, the most of any sector. Total manufacturing employment is now slightly higher than it had been a year ago.

The Fraser Institute and National Citizens’ Coalition have understandable motives for wanting to eliminate the mandatory long form. First, there are libertarian “privacy” concerns.

Second, depriving the government of reliable census data would undermine public programs that these groups dislike. Third, lower response rates at lower income levels (and perhaps among the super rich) would assist them in downplaying poverty and inequality.

The Canadian Taxpayers Federation (CTF) might take the same position for the same reasons. But by all accounts, replacing the mandatory long form with a more widely distributed and advertised voluntary questionnaire would significantly increase census costs.

The Fraser Institute and National Citizens’ Coalition can somewhat coherently argue for spending more public money on right-wing initiatives. However, the CTF is supposedly focussed on saving tax dollars (in order to facilitate tax cuts). As I point out in today’s Globe and Mail, that mandate is hard to square with advocating a more expensive census:

The price of ideology

The Canadian Taxpayers Federation is listed as supporting the federal government’s census decision (Government That Listens? – editorial, Aug. 4). By all accounts, replacing the mandatory long-form census with a more widely distributed and advertised voluntary questionnaire would significantly increase census costs. Is the Federation actually committed to saving tax dollars or does it expect taxpayers to finance conservative ideological causes?

Erin Weir, economist, United Steelworkers, Toronto

This inconsistency may explain the CTF’s changing tune. A month ago, its BC director applauded the government’s decision.

More recently, its federal/Ontario director seemed to question the government’s priorities: “the Prime Minister would rather burn up political capital reforming the census than the Senate.” (Of course, an elected Senate would also entail additional public expenditure.)

A study by Feng Hou and Simon Coulombe of Statistics Canada - ” Earnings Gaps for Canadian-Born Visible Minorities in the Public and Private Sectors” published in Canadian Public Policy (March, 2010) confirms that significant pay gaps in terms of annual earnings exist for racialized minorities which cannot be readily explained away (not that this will stop many economists from muttering incoherently about “unobserved heterogeneity”, nor likely give pause to Conservative politicians bent on eliminating the factual basis for claims that racial discrimination demonstrably exists.)

The study looks at earnings gaps between Canadian born whites and Canadian born visible minorities in the public and private sectors, and by gender. It calculates an adjusted gap which controls for other factors captured by the Census, notably level of education, years of potential work experience, official language ability, and detailed occupation, and employment status (full time or not.)

The racial pay gap thus calculated is largest -  8.5% less  for visible minority men in the private sector (about half of the “raw” difference before controls are added.) The gap is just 1.9% for men in the public sector. For women, the pay gap is 3.8% in the private sector and 2.9% in the public sector. The difference between the pay gap within the private and public sectors seems to be the result of employment equity policies operating in the latter (and perhaps unionization though there is no such variable in the Census.)

For private sector men, the adjusted racial pay gap is largest for blacks (15.7%) but still significant for South Asians (5.8%) and Chinese Canadians (5.2%.)

Will we ever see data for 2011? Will racial pay gaps narrow or widen as the Canadian born visible “minority” population grows to majority status among younger age groups in our largest cities? I don’t know, but I think it is important that we continue to get the data and the expert analysis from Statistics Canada.

Notwithstanding the continuing weak state of the job market, special Employment Insurance income support and training measures which were an important part of the government’s response to the Great Recession have or are about to come to an end. These include an extra five weeks of EI benefits for all regular beneficiaries to a 50-week regional maximum and a further extension of regular benefits for some so-called long-tenure workers, both of which measures expire effective September 11. Access to special EI training benefits ended in May 2010, and three important EI pilot projects will expire later this year.

While there are many reasons to be critical of key gaps in Canada’s Employment Insurance program, there can be no doubt that it has helped hundreds of thousands of unemployed workers and many hard-hit communities weather the economic crisis. The number of regular EI beneficiaries peaked at 829,000 in mid-2009, and remained at 667,000 in April 2010. Taking into account that many workers move on and off EI even in a recession, likely well over 1.5 million Canadians will have used the program at some time in each of 2010 and 2011. Some $17 billion in regular EI benefits will be paid out in each of 2009-2010 and 2010-2011, even though the average benefit paid is well under $400 per week.

Modest income support from EI helped working families deal with a severe loss of income following involuntary layoffs, supported active job searches, and helped high unemployment communities survive. Special measures in support of work-sharing under EI covering almost 200,000 workers helped prevent many layoffs, and some unemployed workers have benefited from special measures to provide income support for retraining.

Even at the peak of the recession, just over one-half of all unemployed workers qualified for regular EI benefits. Those most likely to qualify were male workers who had lost reasonably steady jobs. Most women and younger workers fell through the cracks. Still, the fact that the EI system is easier to access when unemployment is high, combined with the special extension of benefits and other measures, made a significant difference.

Now is not the time to scale back the special measures. Many workers will soon or have already exhausted benefits. Between April 2009 and April 2010, the number of regular EI beneficiaries fell by 55,000 even though the total number of unemployed workers actually increased. The proportion of unemployed workers collecting benefits - the so called B/U rate -  has fallen from a recession peak of 51% to just 45%. Many unemployed workers have been cut off benefits in communities which have yet to see a significant increase in jobs.

The Canadian Labour Congress, the CAW, several Provincial Federations of Labour and many others have called on the federal government to continue benefit extensions, flexibility for work-sharing arrangements, and use of regular EI benefits to support retraining of unemployed workers. EI will continue to be a major issue when the Budget debate begins in September.

(There was a good piece by Laurell Ritchie of the CAW in the Globe yesterday on this issue.)

Altucher gives short shrift to the fact that many good jobs require a university degree, even if it might be possible to acquire equivalent skills and knowledge other ways. (However, credentialism is consistent with his description of university education as “a self-perpetuating Ponzi scheme.”)

His core argument is that investing money in bonds could provide a better financial return than investing it in university:

The differential in lifetime income between a college graduate and a non-college graduate over a 45 year career is approximately $800,000. If I put that $200,000 that I would’ve spent per child to cover tuition costs, living expenses, books, etc. into bonds yielding just 3% and let it compound for 49 years (adding back in the 4 years of college), I get $851,000.

An obvious retort is that there are also non-financial reasons to attend university. But my quibble with Altucher’s financial argument is the assumption that a four-year degree costs $200,000. That’s $50,000 per year.

A single university student can realistically live on half that amount or less, which leaves $25,000 for tuition, books, etc. Tuition fees are too high, but they are nowhere near that high at Canadian universities. I do not think they are that high at most American colleges, especially after deducting grants and scholarships from the sticker price.

Furthermore, why assume that students must necessarily rent their own accommodation, buy their own groceries, etc.? People from rural areas, or who cannot get along with their parents, may need to leave home.

However, living at home is a completely viable option for many if not most prospective undergraduates. For example, Altucher’s kids could presumably enrol at any number of excellent colleges in New York City. Leaving for graduate school after that entails fewer years and greater opportunities for scholarship funding.

It seems to me that Altucher makes an excellent case against sending your children away to super-expensive private colleges. However, there are far more affordable ways to get a financially, intellectually and socially rewarding university education.

In the print edition it has a data geek’s centrefold! Two pages of how census data is used to profile 66 different household/lifestyle types that Environics claims typifies virtually all Canadians. More on that later.

The article also mentions a resource I should have showcased days ago.

http://datalibre.ca/census-watch/

One-stop shopping for an up-to-date guide of who has taken public positions with and against the Harper Government’s decision to ax the mandatory long-form census questionnaire, a rolling media round-up of stories on the topic, and actions you can get involved in.

Thanks to Tracey Lauriault for this invaluable public resource. Viva Data Libre!

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Here is a link to the lead editorial in yesterday’s Calgary Herald. This is the second editorial on this in the past 3 weeks. You know you’re in trouble when the official spokespaper of your party can’t even get onside.

On a related note, The Herald also ran an online poll the day before asking “would you fill out the long form if it weren’t mandatory?” The results were 52% “No”. Even recognizing the inherent limitations of such online polls, the Census would clearly be in deep deep trouble if even close to half the population refused to complete it. As we’ve been saying all along!

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This second point may be the greater sit-up-and-and-take-notice comment. It speaks to the distinction between the “air war” (uncontroversially lost by the Conservatives) and the “ground war” (perhaps not lost by the Conservative strategy).

Whatever the final outcome of the census brouhaha, the well has been tainted. That may have been the point all along.

As mentioned in a recent post, the likelihood is growing with every passing day that some workable resolution will be found.

The Harper team has focused its political fighting power for weeks on getting Canadians to a) be wary of questions, any questions, from the census and b) understand that the Conservatives are on your side should you choose not to answer questions posed by “the state”. Just short of telling people to break the law, they have moved the game to the place where penalties for non-compliance will surely be softened. The effect will be that more people will walk away from this exercise.

Now the challenge is to make clear to everyday Canadians - if you don’t tell your story when you are asked (as rare as that may be) you won’t count.

Having the data doesn’t guarantee that governments or even marketers will address the needs and desires of people just like you. But without such data, you’re as good as invisible. Voice and visibility will be increasingly the preserve of those who can buy it.

Perhaps we can help redirect the stampede of refusniks, turning their concern in another direction. In the era of facebook, credit info, and resales of personal info to floggers of merchandise, Canadians can and should distinguish between what is a bogus threat to your personal privacy and what is not.

But there is a legitimate cause for concern in this trumped-up census affair: the less information about people just like you there is out there, the less your interests are going to get represented in the democratic process.

The Americans went through this a few years ago. Here’s an inspired way to capture what’s at stake. Pretty sure this wasn’t what the Conservatives had in mind, but a whole new generation of Canadians might just get turned on by politics because of the summer-time buzz they just wouldn’t kill. To quote the lyrics of this amazing video: “We gonna get counted, No way ’round it…..Young like that, To amount like that….We all matter…..” That’s what we’re talkin’ about.

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Good article in the Calgary Herald on Friday July 30th by Sarah McGinnis. But it contains one small piece of “misinformation”, unfortunately, from Susan McDaniel (University of Lethbridge Prentice Research Chair in Global Population and an adviser to Statistics Canada).

“The mandatory long form census is the only complete view of the population, allowing a rare opportunity to track the homeless, count those living in illegal suites or get details on the very rich living behind gated communities”

The Census does not actually do any of these things.

Statistics Canada attempts through all reasonable efforts to count the homeless at shelters and the like on Census Day. The agency acknowledges, though, that it is very difficult to count persons who do not have a permanent address or who consider themselves homeless and some people (for example, those who slept out of doors) may have been missed. Persons without a home and staying with family or friends at the time of the Census may have been included in the count for that household. Some limited data may be available for persons in “Shelters for persons lacking a fixed address”, but this will not be a complete count of the homeless by any means. The Census, which counts persons with a usual place of residence, thus, is not really the appropriate vehicle for collecting nor disseminating information on the country’s homeless. This is the case as of 2006. Maybe some day Census counts of the homeless may become more complete, or a new specially designed survey may be created for this purpose.

Basement suites in single-family dwellings are counted as “Apartment or flat in a duplex” and although a Planner may know that a certain percentage of such suites in a given area are illegal, they are not identified as such in the Census. Census data does not even allow users researching aggregate data to directly distinguish between the “suites” in the main floor of a house versus the “suites” in the basement and they have to estimate this for themselves using the Structural Type of Dwelling variable, the Tenure variable (i.e. Rented or Owned) and Household variables (such as number of persons in the household or living arrangements) in custom tabulations. The Census Reps do not have any way of identifying the legal status of a particular suite. They just count all suites. Maybe someday someone will devise a question, which will allow the Census to count secondary (let’s not call them “illegal” and needlessly worry homeowners) suites so we can get a truer measure of the available housing stock. Regulation of secondary suites is a municipal responsibility.

Similarly with gated communities, unless, such communities constitute an entire Dissemination Area or DA (expensive custom geographies notwithstanding) on their own, they cannot be identified separately from any other. And, again as stated above, of course all data for any persons living in these communities are only available in the aggregate and are subject to suppression rules. Using terms such as “gated communities” imparts a negative stereotype for some, provokes a defensive stance for others. The Census does not use such terminology and consistently reports information in a very neutral fashion.

I wish certain spokespeople would be a little more careful with how they represent what is collected by and available from the Census. Imprecise descriptions can attribute more to the Census then it is able to provide.

Incorrect and inappropriate use of certain terminology (as it applies to availability of Census data) actually also does a disservice to those making a case for the Census vis-à-vis confidentiality at enumeration time, etc. For example, oftentimes respondents are reluctant to tell the Census Rep that they have a suite in their basement because they fear that this information (revealing their “illegal” suite) will get back to their municipal government. This feeds the “intrusion” argument and contributes to an undercounting of these dwelling units. And so on.

And then this incorrect terminology will get erroneously applied to Census data and reported over and over again in the media. And over time it becomes “fact”.

The Census does not count the “homeless”, “illegal suites” or “gated communities”. The Census does not actually do any of these things. We may like it to, and wish that it did, provide us with this information, but it does not. Someday, perhaps, it will, but in the meantime let’s not ascribe to the Census that which it is not. Let’s just value it for what it is.
Ian Faris

In today’s op-ed, I argue that homelessness rises after a recession, but that there’s a lag effect.  To be sure, after the recession of the early 1990s, homelessness in Toronto (as measured by the use of emergency shelters) increased very substantially, but several years after the recession had officially ended.  I argue in the op-ed that all three levels of government can and should act to prevent what will likely be a substantial increase in homelessness.  Municipal politicians can make homelessness a priority in upcoming elections, provincial governments can fund more rent supplements for low-income households, and the federal government can make pemanent–and increase funding for–the Homelessness Partnering Strategy.

Last Saturday CBC’s The House had a sparkling section on the census which offered some thoughts from a Danish statistician and the views of Canada’s longest serving Chief Statistician, Ivan Fellegi. On Tuesday Tavia Grant’s superb article in the Globe and Mail looked at how Europeans tackled the challenge.

Like so many other imports from Europe, the joined-up administrative approach would be difficult to attempt in Canada, and probably unsellable politically once people realise what reliance on “administrative” data means. In fact it is likely the Conservatives and most particularly the libertarian base that supports their current position on the census who would most resist such a move.

To follow these European examples, administrative data from various sources would be collated under our Social Insurance Number ( or a new “universal” identification).

There, in one place, would be our school records and, soon, our health records. It would tell the story of how our incomes rose and fell and how often we were unemployed over our life cycle, and our interface with the State for income supports, traffic violations or more serious aspects of the justice system. As suggested in the UK, it could easily be linked to credit history. In the case of some European nations, you would have to report to the police every time you change your address or job.

Talk about Big Brother.

Compare this to the non-intrusive use of information through the Census long form.

The focus of interest is not you, but “us”: statistical categories of people just like you - the people who live in your neighbourhood, who are in your age group, with your level of education, in your ethno-racial group. Census shows how we compare to our peers and how one group compares to another.

These data don’t track you, they accurately map what is changing in Canadian society. Then it’s up to Canadian society to decide what needs to change. Neighbourhood by neighbourhood, region by region, and nationallly.

The census has changed over time to meet our needs as an evolving social experiment, an unusually diverse society keen to live their lives in relative peace and equality.
We are the United Nations in action, and Canada works partly because of what we know about ourselves and how we use that feedback loop to make adjustments.

The longer set of questions in the mandatory census provide the most helpful information for that process.

It needs to be repeated: There is no way census data can be used to identify what is going on in your personal life.

Until this census, it was possible to take a peak at the answers of individual respondents 92 years later, when presumably the people who answered the questions would be long since dead. But the Conservatives have thought ahead and guarded you against future coercive states and nosy family members, geneologists or historians who want to invade your privacy, by introducing a check-off box to make even that disclosure voluntary.

Admittedly, if you are on the receiving end of the long-form process, some lines of inquiry may seem strange coming from “the government”: How much time do you spend with your children or doing housework? When do you leave for work, how long does it take you to get there, and how do you make that journey? How many bedrooms do you have in your house? What about bathrooms?

But, as weirdly personal as some of the questions seem, it’s really not all about you.

It’s about understanding how widespread are the attributes of prosperity like adequate housing.

Or identifying where pandemics could be spread more quickly.

Or assessing the degree to which young families are spending more time at work than with their families or communities.

Or the changing patterns of how families get formed over the course of generations.

Or how much patterns vary among people with a PhD versus a certificate of high school completion.

Are we essentially the same, or are we pretty different? Are the differences converging or getting bigger?

Because these stories must mandatorily be collected from all Canadians (1 in 5 households, in every corner of the land) census data helps us see how these stories are evolving not just at the “Canadian” level, whatever that aggregate means, but in its full diversity: by region, ethno-racial background, income level, age, household type, immigrant status, and level of ability or disability.

Every single one of these parameters is changing quickly, as Canadian society ages, the labour force shrinks, we continue to flock to cities, and our legacy as a nation of immigrants takes another leap forward.

You know the punchline - we need to reverse this decision.

Canada-US Comparison

American GDP figures released this morning indicate an annual growth rate of 2.4% in the second quarter (April - June). Over April and May, Canadian GDP grew at an annual rate of just 0.6%. Without dramatically stronger Canadian growth in June, we will have underperformed the US in the second quarter.

Sectoral Breakdown

Canada’s relatively flat total GDP masked significant changes in output between industries. The service sector contracted. An especially large drop in wholesale trade, a link between production and buyers, may confirm that the recovery is losing momentum.

The next steepest drop was in construction, likely reflecting a slowdown in the housing market without any meaningful pick up in non-residential business investment. Manufacturing was basically flat overall, with an increase in non-durable goods slightly outweighing a decrease in durable goods.

The only real growth sector was commodity production. Mining, oil and gas expanded by 3.4% in May. That figure would be quite respectable as an annual growth rate, but is incredible as a monthly growth rate. Meanwhile, forestry and logging expanded by an eye-popping 7.7%.

The staples thesis posits that Canadian economic development is driven by the extraction and export of staple commodities. Certainly, staples drove Canadian growth in May, offsetting declines in most of the rest of the economy.

Importantly, GDP figures only measure changes in the volume of output. Canada’s staples recovery is even more dramatic if one multiplies those volumes by the rebound in commodity prices since last year.

His insightful summary of the arguments on coercion that have emerged during the census debate follows in full here, with his permission as well as that of The Hill Times.

Government coercion in perspective: where does the long form of the census fit?
Filling out the long form census takes under 30 minutes, it does not ask about your sex life and no individual data have every been released. StatsCan officials know that their very existence depends on keeping individual data top secret.
By W.T. STANBURY
Published July 26, 2010

The core of the Harper government’s case for making the long form of the census voluntary (rather than mandatory for 20 per cent of households as it has been for 35 years) is that it is intrusive and coercive.

Here I examine the various types of coercion that are now or have been imposed by the federal government in an effort to put the mandatory long form into perspective.

The opponents of the government’s move to spend an additional $35-million to try to elicit one-third of households to volunteer to complete the long form (and I am one of them) need to deal directly and respectfully with the arguments for the change. Analysis can help here as in all policy issues.

The Government’s Arguments

The initial stated argument for the change in the census was as follows: “Our feeling was that the change was to make a reasonable limit on what most Canadians felt was an intrusion into their personal privacy in terms of answering the longer form,” Erik Waddell, spokesman for Industry Minister Tony Clement, said (Jennifer Ditchburn, Canadian Press, June 29, 2010).

Mr. Clement said the government’s decision (actually that of the PM personally, according to Jeffrey Simpson, The Globe and Mail, July 17, 2010) was “based on the fact that many Canadians had complained of the coercive and intrusive nature of the census, but Clement had not seen polling on the issue.”….According to Clement, “Every MP has had complaints like that so this year we decided to at least try another method that could be a sound method that would beat the issue of concern of degradation of data, and deal with the issue of coercion and too much intrusiveness,”(Ditchburn, Canadian Press, July 1,2010)

Mr. Clement said a week later that “Every four years, when the census is taken, Canadians flock to their local Member of Parliament to complain about being forced to answer ‘very intrusive questions,’” which cover everything from income to education level. “That’s the balance we’re trying to strike, between people who are concerned about that as opposed to the need for data,” (The Globe and Mail, July 7, 2010).

On July 13, 2010, Industry Canada issued a press release. “The government does not think it is appropriate to force Canadians to divulge detailed personal information under threat of prosecution.”

When told that the privacy commissioner had received less than a handful of complaints, Mr. Clement said that “If you’re concerned about government intrusion, you’re not likely to complain to another organ of government….They would see it as compounding the issue if they complained,”(Steven Chase, The Globe and Mail, July 15, 2010).

Sen. Marjory LeBreton, who leads the Conservatives in the Senate, suggested nothing will be lost by moving to a voluntary long census. “There’s still going to be a long form,” she said in Ottawa. “The only difference is, this is voluntary. Canadians, I believe and we believe, will be very happy to fill in the long forms,” she said, (The Canadian Press, July 13,2010)

Maxime Bernier, a former minister of Industry, was quoted in a news story on July 18 saying that during the last census period in 2006, he received an average of 1,000 e-mail complaints a day while the survey was going on.(Heather Schofield, Canadian Press, July 18, 2010).

Treasury Board President Stockwell Day said “All we’re saying is, people shouldn’t be threatened with jail because they don’t want to tell some unknown bureaucrat how many bedrooms they’ve got in their house,” on Calgary radio station QR-77… “And you know, even prisoners of war only have to give their name, rank and serial number,” (quoted by Steven Chase, The Globe and Mail blog, July 23,2010).

Editorial Support

By July 24, only one newspaper editorial supported the government. (In contrast, The Globe and Mail has published five editorials opposing the change: July 12, 19, 21, 22, 24).

Here is the core of its argument of the Toronto Sun on July 20,2010: “Call us crazy, but we believe the less the government knows about our personal lives the better. Big Brother is so … well, so 1984.It’s also more reminiscent of the constraints of communism than the freedoms of democracy….We hope this bully-boy tactic—either fill it out or face prosecution—is forever down for the count…. If it [the state ] has no business in the bedroom, then it has absolutely no business knowing how many bedrooms are in our homes.”

For a wonderful deconstruction of the Sun’s editorial, see Robert Silver, Globe and Mail blog, July 20,2010

Legitimate Exercise of Coercion

In a democratic society, sovereignty rests with the people. They delegate to their elected representatives authority to make laws which are ultimately backed by coercion. Thus the people arrange to be coerced by the government they establish. The power to impose coercion is—properly—tightly circumscribed. First, both Houses of Parliament must approve the laws under which coercion can be exercised. Second, the civil right of individuals are protected in the Charter of Rights and Freedoms, part of the 1982 Constitution. Third, in almost every case, coercion on the form of monetary penalties or imprisonment cannot be imposed until after a trial has been held before a court or court-like tribunal. In all cases, there are rights of appeal, usually in two stages. Fourth, in some cases, individuals can appeal to one or more specialized bodies which have a measure of independence to investigate allegations of improper action by a government department or agency.

Coercion in Perspective

Coercion by the state is always a matter of degree. Clearly the most coercive act by the state is the imposition of the death penalty after due process of law. (Canada eliminated the death penalty for murder on July 14,1976. The last execution was in 1962). Next might come the imposition of the draft for military service in time of war. (Note that the death rate varies greatly by branch of service and particular types of assignment.) Somewhat less coercive is imprisonment for a long tern (up to life) after due process of law. (But we know that the actual sentence may be far less than the one handed down at trial.) Then would come a large fine—by large I mean large relative to the person’s ability to pay—and which also ensures that there are no ill-gotten gains from the crime. And then we come to fines for parking tickets (at the local level) and civil monetary penalties (for example, the Ethics Commissioner can impose a penalty of up to $500 for failure to file the required information.)

Taxes are by definition compulsory levies, and in Canada the overall tax burden is high because we have a welfare state. People understand that if they fail to pay the taxes levied by government, they could be fined ,hit with penalties exceeding the unpaid taxes, and—just possibly—be put in jail.

Long Form as Coercion

So how coercive was the mandatory long form of the Census? Every five years a random sample of 20 per cent of households were selected to complete the 53-question long form. This task–done only by an adult for the entire household–usually took less than 30 minutes. The questions may probe what some define as intimate matters, but the responses are not just confidential—they are treated as top secret by Statistics Canada. The agency takes great pride in keeping individual files secret, and in preventing inferences about small groups of individuals from published information.

How many people would be required to respond to the long form? About 1.1 million persons out of a total population of some 34.2 million as of July 1,2010. Here is the calculation. The average size of households is 2.5 persons, based on the 2006 census—so that means 13.7 million households. A 20 per cent random sample equals 2.74 million households. But only one adult in each household answers the questions—so divide by 2.5 to get a total of 1.1 million..

Despite the possible use of coercion, StatsCan relies—as do the income tax authorities—on voluntary compliance. They are prepared to make several call backs and/or telephone calls to urge compliance. Officials know that the maximum fine that can be imposed if a case is taken to court is $500. In theory ,a judge could jail a person for non-compliance, but there is no record of this ever being done. Section 31 of the Statistics Act provides for these penalties: “fine not exceeding five hundred dollars or to imprisonment for a term not exceeding three months or to both.”

Prosecution can take years to reach a resolution. For example, Saskatoon-based activist Sandra Finley continues to fight the federal government in court over her refusal to return the 2006 census, (Ditchburn, Canadian Press, July 1, 2010).

In summary terms, the average Canadian adult will be chosen to fill out the long form once in a lifetime. The task will take under 30 minutes. Some of the questions may be puzzling, but they do not ask about anyone’s sex life. (That is left to Oprah and some other talk show hosts.) Finally, no individual’s data have ever been released. StatsCan officials know that their very existence depends on keeping individual data top secret.

Conclusion

When compared to the full range of coercion exercised by the federal government, that related to the long form of the census is the most mild. And there are very good reasons why it is mandatory. A random sample (in this case 20 per cent of households, not individuals) is the only scientific way (short of a 100 per cent count) of assuring that the data will not be biased in ways that are impossible to determine precisely.

W.T. Stanbury is professor emeritus, University of British Columbia.

news@hilltimes.com

The Hill Times

The report …  concluded 2000 to 2009 was the warmest decade ever, and the Earth has been growing warmer for 50 years. Each of the past three decades – 1980s, 1990s and 2000s – was the hottest on record … Of the 10 measurements, the report said seven are rising – air temperature over land, sea-surface temperature, air temperature over oceans, sea level, ocean heat, humidity and the temperature of the troposphere, which is the atmosphere closest to the Earth’s surface. Three indicators are declining – Arctic sea ice, glaciers and spring snow cover in the Northern Hemisphere. All of which point to a warming trend.

Also making news is the latest cap-and-trade planning from the Western Climate Initiative, which made the front page of the Vancouver Sun yesterday. I’m hesitant to reprint anything from that story as it gets some of the basics wrong, and makes some big assumptions about how the regional cap-and-trade system will play out in BC. While BC has legislative authority to enter a WCI system in 2012, there are still many details to be worked out about how permits will be allocated, what penalties would be applied, etc. BC was supposed to release some new regulations on how the system would play out today, but then pulled it at the last minute.

The WCI announcement comes on the heels of the demise of an American cap-and-trade program in the US Senate, an outcome that puts all of the onus for US greenhouse gas reductions on states and the Environmental Protection Agency (which, fortunately, has been found to have jurisdiction to regulate GHGs as a pollutant but has not moved due to developments in Congress). A good synopsis of these developments and possible short-term outcomes is here.

Like the poisonous politics of Congress, however, the reality is that the WCI has been creamed at the level of state legislatures. It is one thing for the WCI to state some parameters of a plan; another to win the political support to make a real cap-and-trade system a reality. Officially, there are seven US states and four Canadian provinces that are party to the WCI, plus a longer list of “observers”. But Washington and Oregon, in particular, have faced huge opposition in their state legislatures, and I suspect the others are also having misgivings. The Globe’s coverage of the WCI comments that Ontario and Quebec are uncertain about WCI, so it is anyone’s guess who’ll really be there when 2012 hits.

So on the surface this new announcement may be a step forward, but as always the Devil is in the details. And the details we have suggest that the current form of the WCI is pretty leaky in terms of actual emission reductions. Ian Bruce from the David Suzuki Foundation flags a few very important concerns:

First, the WCI partners shouldn’t weaken the shrinking yearly quota for industrial emitters by allowing companies to buy pollution permits for promised action in the future versus reducing their current emissions. (It wouldn’t be responsible to pass on a financial debt to future generations, and the principle is the same) Second, industry’s target or cap for reducing emissions should be in line with what leading scientists say is necessary to avoid catastrophic consequences of global warming, a reduction of about half over the next decade. Last, these provinces and states can ensure the environmental integrity of the cap-and-trade system by limiting the use of carbon offsets in the system, as this weakens the incentive for industry to take responsible action to reduce its own emissions.

The region-wide target is 15% below 2005 levels, not 50%; carbon offsets can be used for up to 49% of emission reductions; and other provisions allow more “flexibility” in meeting targets (see Figure 4 on page 13 for a list). When I see some meaningful commitments to stop the expansion of fossil fuels with a plan for real reductions, I’ll be the first to do a jig.

The tricky part is that changing these elements would render the program that is already getting a rough political ride virtually impossible. As Bill Rees says, “the ecologically necessary is politically infeasible but the politically feasible is ecologically irrelevant.”

With every passing day, even through the course of a given day, the path to the final outcome flips and flops, zigs and zags.

Two days ago the House of Commons Industry Committee met for the first time since the Government quietly announced its census decision. Remember? Via the Canada Gazette (the obscure journal of record for the Government of Canada’s news on federal laws and Orders-in-Council). On a Saturday. Amidst the G20 riots in Toronto.

In the ensuing weeks, Canadians have been treated to an ad-hoc mass public education campaign, compliments of wall-to-wall media coverage and endless on-line commentary (I know).

For most people, it is safe to say, the flurry of drama over statistics was a noodlescratcher until, with every passing day it became clear the myriad and unexpected ways that census data informs daily decision-making and impacts the quality of our lives. Suddenly the census saga became a parable about how an information society uses, and generates, information, and a metaphor for the role of the state.

Tuesday’s Committee hearings marked the first official exchange about the meaning of all this sound and fury. Committee MPs and the public heard from the Minister responsible for Statistics Canada, Tony Clement, about what happened and why. Testimony was also heard from former Chief Statistician Ivan Fellegi, and the Chief Statistician who had resigned just days before, Munir Sheikh. Both provided moving and forceful statements about the role of the public service, and the role of robust statistics in a modern democracy. A handful of experts and data users weighed in, as well as the requisite government supporters. The most memorable testimony for me was that of Elisapee Sheutiapik, Mayor of Iqaluit, who — in answer to the now-famous “what business is it of the government’s how many bedrooms I have?” rant-by-rote delivered by the Conservative faithful — said in quiet tones that in her community it is too cold to be homeless; and though homes tend to be small in scale, everyone accommodates those who need a place to sleep. She didn’t take it further, but could have clarified: it is not uncommon for 15 people to make do in a 2 bedroom home in this part of Canada. That, sadly, has not changed in decades. And the only reason we know that is because of the mandatory census long-form questionnaire, which can only be filled in by many residents of Iqaluit because it is mandatory and therefore the Government of Canada has to provide the resources to ensure that such people, who do not speak either official language well enough, have someone to help them understand and answer the questions.

Which makes one wonder - is the real issue of mandatory versus voluntary more about the Government’s desire to opt out of asking than citizens’ desire to opt out of telling? The Conservatives plan to spend $30 million advertising the voluntary National Household Survey, but would they spend $30 million making sure the resources are there to guarantee stories are collected from all types of Canadian communities and citizens, even if it requires face-time and translation services? Not unless the law says it’s mandatory for everyone’s story to be told, is my guess.

There is far more testimony that is worth hearing, and there is reason to hope that more Committee meetings will be scheduled at some point. But this all-day meeting aired the broad contours of the debate…and sowed the seeds for the way forward.

Forty-eight hours have now passed, and an elegantly simple exit strategy is emerging from all this testimony, an amalgam of the presentation by Don McLeish, who spoke on behalf of the Canadian Statistical Society; the presentation by Ian Mackinnon, Chair of the National Statistics Council (the advisory body to Statistics Canada), posted here by Andrew Jackson the other day; and the sage advice of Ivan Fellegi.

Here are the four planks of a graceful resolution to this standoff, a resolution that has broad support:

1) Maintain the mandatory long-form questionnaire for the 2011 Census cycle
2) Meanwhile test and assess bias in voluntary survey options, using the expertise of both Statistics Canada and the National Statistics Council, before choosing a new approach for the 2016 Census
3) Review and adjust penalties for non compliance (for example, change the Statistics Act so no one goes to jail)
4) Ensure the independence of Statistics Canada, beginning with — as Fellegi has noted repeatedly — an open and transparent process of identifying the successor to Munir Sheikh, with a visibly eminent panel of experts and statisticians on the selection committee.

This is the mantra for anyone talking to Conservative MPs in the days and weeks ahead.

Repeat after me:
Stick with what we have for now, study changes to the status quo so we know what we’re unleashing, add a get-out-of-jail-for-free card, pick the new guy well.

This is doable. This will work. Let us make it so.

Since forming government in 2006, the Harper Conservatives have withdrawn federal presence from social policy, health policy, and climate change while ramping up defence, security and trade. The cut to the GST was less about putting a little more cash in our pockets than letting provinces decide whether they wanted or dared raise the revenue themselves. The census decision is yet another big step in the direction of making the provinces and territories do the heavy lifting when it comes to defining and funding the social and basic infrastructure services Canadians receive.

Their take-no-prisoners approach to the mandatory census long-form questionnaire takes this downloading of responsibility for citizens’ wellbeing one step further. We’ll see how the Premiers publicly respond when they meet at the end of next week. But here’s what they all know:

Public decision-making in 21st century developed nations relies on an evidence base. Effective and real democracy requires governments to balance the interests of all citizens. For that you need accurate and reliable information about who your population is, and how it is changing.

The Conservatives say the voluntary National Household Survey, made public this week, will provide this information adequately. But, if there was any doubt before, testimony from experts at Tuesday’s Industry Committee hearings made absolutely clear a voluntary survey cannot replace a mandatory census. To declare otherwise is stating a known falsehood.

Simply put, you cannot correct for sample bias if you don’t know the population from which the sample is drawn. Without making sure Canadians from all walks of life and all corners of the land are providing answers – information which the Conservatives agree is necessary, given the questions on the National Household Survey – there is no way to assess whether you are reflecting Canadian reality, or just the reality of those who opted to answer.

A voluntary survey cannot give us a true picture of Canada’s population by geography, immigrant status, ethno-racial background, household makeup, income level, educational attainment, housing conditions, and work/life balance. And without this information, it becomes exceedingly difficult if not impossible for governments at any level to attempt to practice the democratic ideal: a government of the people, by the people, for the people.

Maybe that’s the point of this exercise.

Though Stephen Harper has a constitutional right to blind subsidiary levels of government, exercising that right raises serious questions about his judgment, and that of his government. The Conservative response is that provinces or cities, businesses or investors are free to collect what information they want. That willfully misses the point, as has become the dreary pattern in this debate.

The leaders of Canada’s provinces and territories meet in a few days in Winnipeg, at the annual Council of the Federation meeting. The question will be: if Harper’s team stays the course and pushes the mandatory long-form census questionnaire over the wall, can all the provinces’ horses and all the territories’ men put Humpty Dumpty back together again?

There are two answers, one operational and one political.

Operationally, should Harper’s decision go through, it will be difficult for the provinces and territories to cobble together a replacement for the mandatory census long-form questionnaire, for reasons such as:
• Creating an administrative infrastructure in each jurisdiction to roll out the process, ensure the security checks so critical for privacy reasons, and introduce a processing protocol that permits inter-jurisdictional sharing of information
• Finding consensus on the list of questions to be asked
• Developing a working relationship with the First Nations and Inuit communities, for which the federal government is responsible and which has been a slow and considered exercise of developing appropriate ways to gather information.
• Costs, with the northernmost jurisdictions facing the largest burdens.

Given the hurdles and the tight time-frame in which all this would have to come together, it is both more efficient and sensible to prevent the Conservative game-plan from taking us down this path. This is a matter of politics, but not partisanship.

The meeting of the provincial and territorial premiers may yet yield the game-changer moment or idea. From what has been said publicly thus far, and what we know of these Premiers, the turning point to this cliffhanger could come from:
• Premier Williams, a Conservative who is broadly respected for standing up to both the federal government and big business to protect the public interest of the people of Newfoundland and Labrador
• Premier Charest from Québec, who has made crystal clear that the proper functioning of the state cannot occur without reliable information and analysis. Any government of Québec also has an ongoing interest in comparing that jurisdiction’s outcomes to the rest of Canada.
• Premier McGuinty, a Liberal, who has stated it is difficult to see what “compromise” means on the matter of the mandatory long-form questionnaire. He has explicitly connected that concern with the fact that Ontario, along with other jurisdictions, has committed itself to a poverty reduction strategy. It will not be possible to assess the success of such initiatives, or even track any post-recession trends in inequality, housing affordability, etc. without the information gleaned from a mandatory census of people’s response to these types of questions.
• Premier Selinger, the host of the Council of the Federation meetings from August 4 to 6, who was appointed Finance Minister in 1999 when the NDP formed government in Manitoba under Gary Doer. He and the NDP have been there since. This is a province grappling with challenges facing their Aboriginal residents – some of the Canadians who will assuredly be under-counted and under-represented if the assessment of living and working conditions relies on the voluntary National Household Survey.
• Premier Aariak of Nunavut, whose colleague Elisapee Sheutiapik, Mayor of Iqaluit, provided such stirring testimony at Tuesday’s Industry Committee on the question of inadequate housing and over-crowding in her community, and communities throughout Nunavut. While stories are powerful, these leaders know stories cannot assess how systemic these problems are and whether they are changing over time. Data are, after all, the plural of anecdote.

Though the roots of this story are data and statistics, it is really a story about leadership, how one views the role of the state, and who speaks for Canadians, all Canadians. It crosses all party lines, including many died-in-the-wool Conservatives.

Former Chief Statistician Munir Sheikh became a national hero for his decision to say, with integrity and deference, “no” to the charade that this purely political and disruptive decision was supported by Statistics Canada.

Now we need more than a hero, more than someone who says no. We need leaders. Elected officials who will capture in clear and resonant language what is at stake for Canadians everywhere, and define what we are saying yes to.

That voice could come from any point of the compass in this land of sensible counters and take-no-guff pragmatists.

Can the provincial leaders fix the census mess? Perhaps. If so, it will be because statesmanship eclipsed brinksmanship. And that’s the type of leadership all Canadians want.

Refreshingly, the report begins from recognition of the “puzzle” that many years of neo liberal or market friendly policies - not least trade liberalization and corporate tax cuts - have had no apparent impact upon Canadian business sector labour productivity growth or the Canada - US productivity gap. (Business sector labour productivity is now just 70% of the US level.) “Numerous reforms  widely believed to encourage productivity  have been implemented over the past twenty years, seemingly to no avail.” The report even accepts that there is something of a case to be made for the argument that the failure is not one of public policy, but a failure of the private sector. “Key elements of Canada’s history and industrial structure may have nurtured a complacent business culture.” (p8.)  The report notes (p27) that commodity specialization may generate high incomes but tends to undermine competitive pressures to innovation and high value added activities.

Canada is found to have an especially weak record in terms of innovation, which shows up in very weak multi -factor productivity growth. This is likely in major part a consequence of our inherited industrial structure, which is weak in highly innovative sectors such as advanced machinery and equipment, and increasingly tilted to capital rather than innovation intensive raw material extraction and processing.  Drummond cites a study by Andrew Sharpe showing that almost all of the productivity slowdown since 2000 is due to lagging performance by the manufacturing sector. He also details very weak Canadian business investment in advanced technology (machinery and equipment and information and communications technology ) compared to the US. Real capital investment per worker in these areas in recent years has been a good 20% below the US level.Business investment in research and development also lags seriously behind other advanced industrial countries.

This would lead many of us to think about how to reshape our industrial structure through sectoral development policies, but  that is not the case here since the focus is, broadly speaking, only on framework policies.  The report totally fails to note let alone draw lessons from the rapid industrial development of Asian countries which has been based on a host of strategic economic interventions, or the major role of defence policy and procurement in the US advanced capital goods sector.

Drummond also fails to consider the idea that “sound” macro-economic policy may have had adverse consequences for productivity growth. He argues that price stability and fiscal rectitude should have boosted business confidence, but perhaps operating below capacity has dampened the need for investment in capital and skills.  The fact that low unemployment in recent years failed to spark real wage growth, a major shift into more secure forms of employment and greater business investment in skills suggests that  we have continued to operate with some slack and that a tighter labour market might have boosted labour productivity growth.

Having rejected by assumption and approach more interventionist micro policy or more expansionary macro policy, Drummond falls back on the usual list of policy prescriptions, albeit with little genuine conviction that there are big bullets to be fired. Thus he calls for further trade and foreign investment liberalization; an end to tax measures which penalize small companies which grow bigger (actually a good point);  and cuts to regional EI benefits (a sticks approach as opposed to a more sensible alternative of extending the scope for positive EI supported active job search which could  help workers move to growing regions.) In a more positive vein, he calls for higher levels of public infrastructure investment and less waste of the skills of immigrants. Ultimately, he falls back on the need for more research to figure out what goes on in the “black box” of the firm, and why some innovate and add value while others do not.

In short, this is well worth a read, but the rigid frame of economic orthodoxy precludes consideration of some promising policy directions.