Economistsâ€™ Manifesto for Productivity
TD Economics has posted this manifesto, penned by Chief Economist Don Drummond, in the belief that it represents a broad consensus among economists on how to raise the rate of productivity growth in Canada. http://www.td.com/economics/special/dd0906_prod.pdf
The manifesto – unsurprisingly – closely reflects the mainstream (Bay Street, Department of Finance, OECD) focus on “sound” macro policy, free trade, de-regulation and tax cuts. Relentlessly progressive economists will want to take their distance from a lot that is said here, thopugh most of us will agree with the key point that higher productivity growth is an important goal. And Drummond has – refreshingly – taken on board some ideas from the centre left. Most notably, he does not call for further across the board cuts to the corporate income tax rate, and instead speaks to the need for measures which might have a more direct impact on real, productivity-raising, business investment in machinery and equipment (eg an investment tax credit.) He briefly notes the need for more public investment in infrastructure, and investment in skills outside post secondary education, not just more PhDs. He even hints at a reform to the EI program which would be more than just about cuts, but about extending coverage.
Most refreshing of all, Drummond is honest enough to admit that economists will have a tough time selling a productivity agenda so long as productivity gains go to higher profits and high income earners, rather than to higher rates of real investment and higher real wages.