Making Canada Relevant Again- The Economic Super-Thread

[foresterab]

Taken from the Globe and Mail today: http://gold.globeinvestor.com/servlet/ArticleNews/search/GAM/20121130/RBECONLABLABOUR1129ATL/stocks/news?back_url=yes

People without jobs, jobs without people
TAVIA GRANT
00:00 EST Friday, Nov 30, 2012


It's Canada's labour market conundrum: Evidence suggests skills shortages in the country's jobs market are growing, while at the same time pools of labour surplus are also increasing.

On one hand, Prime Minister Stephen Harper said this month that skills shortages are "the biggest challenge our country faces." He's concerned about looming shortfalls of engineers and scientists and wants new immigrants to help fill the gaps.

But on the other, a quarter of a million Canadians have been jobless for more than six months and this country appears to have too many people in some professions, such as tour guides and factory labourers, according to a report Thursday that seeks to untangle the duelling trends.

"This labour market mismatch is big enough not only to reduce the effectiveness of monetary policy, but also to limit the growth potential of the labour market and the economy as a whole," CIBC World Markets Inc. deputy chief economist Benjamin Tal said in his analysis.

First, he examines labour shortages. At least three in 10 businesses say they face a skilled labour shortage, CIBC says, based on Bank of Canada and Statistics Canada calculations. That number is double the rate of early 2010.

The increase in skills shortage concerns comes as Canada's employment rate stagnated, "loosely" suggesting these shortages are having a negative impact on job growth.

Meantime, the number of job vacancies reported by companies has jumped 16 per cent in the past year, led by openings in Alberta.

Cries of skilled labour shortages should be taken with a few grains of salt because they are subjective measures, Mr. Tal notes.

"Yes, a CEO might indicate that her company is facing a skilled labour shortage, but is it severe enough to force her to raise wages and/or increase on-the-job training activity? Actions speak louder than words."

Delving deeper, he looked at 25 occupations with both rapid increases in wages and low or falling unemployment rates - areas that are showing clear signs of a tight labour market.

He found the largest skill shortages were in health occupations, the mining industry, advanced manufacturing and business services. Together, these occupations comprise a fifth of total employment in Canada.

Therefore, "one-fifth of the Canadian labour market is currently showing signs of skilled labour shortage," he said.

Government efforts to bring in more skilled immigrants and boost apprenticeship programs are welcome; however, they won't be enough to fill these gaps, he said.

Next, Mr. Tal examined labour surpluses. He looked at 20 occupations with rising unemployment and slowing wage growth - a pool that includes food counter attendants and recreational guides.

These jobs account for a fifth of unemployment in Canada.

This might help explain why the duration of joblessness is still high. The average length of unemployment is 16 weeks - five weeks longer than pre-recession levels, and two weeks above the average rate seen since the early 2000s.

A quarter of a million Canadians have been unemployed for more than six months, accounting for 18 per cent of total unemployment in the country. While the long-term jobless rate has come down in the past two years, it is still higher than its long-term average, especially among people over the age of 45.

The mismatch means measures of long-term unemployment are likely to even climb higher, he said.

Retraining efforts should be part of the solution, he added - something the federal and some provincial governments are tackling, to various degrees.

For now, though, the people-without-jobs and jobs-without-people conundrum remains.

Economy Lab delves into the forces that shape Canadians' standard of living. Find it at tgam.ca/economylab, or follow it on Twitter via @Economy_Lab


Working in Alberta in the natural resources industry I see this alot...wages are going up and labor is very tight in my profession but overall wages especially in the service industries (where the other half works) have remained stable in part due to the ease of entry into some of those professions.  While this has implications on the other post here regarding Educating our Future Leaders http://forums.army.ca/forums/threads/108384.0.html   it also becomes a major problem in growing the economy (and hence tax/debt/deficiet relief) if companies can not grow due to staff shortages.

 

[mariomike]

He found the largest skill shortages were in health occupations, the mining industry, advanced manufacturing and business services.

This comes at a time when Baby Boomers are reaching the end of their careers, creating a demand for suitable replacements.

Paramedics expected to be in high demand over next decade:
http://www.canada.com/health/Paramedics+expected+high+demand+over+next+decade/6561136/story.html

"While there were positions available all over the province, many of us were competing for the positions available in the Greater Toronto Area."

Toronto's Call Volume has increased by 30 per cent over the last ten years. *

With all the new high-rise condominiums under construction in the city combined with the "aging tsunami" and universal health care, Call Volume is likely to continue to flourish.

* In 1968 T-EMS responded to 70,258 calls for help. Now, they respond to over 315,000 emergency calls per year.  Their geographic area remains exactly the same size.

“Looking at EMS into the future, we’re going to need to deal with the rising call demand. There’s no question about that." Chief of T-EMS.

"( Yet ) the number of fires ( in Toronto ) has fallen, from 3,700 in 1960 to just 2,239 last year".
National Post 16 July, 2011

 

[a_majoor]

Municipal budgets don't get nearly the attention they should, yet the combined effect of their out of control spending may rival that of some of our provinces. London, Ontario alone has a budget approaching a billion dollars a year, and a debt of @ $400 million, yet boasts some of the worst roads and infrastructure in the province. Municipal politicians have simply abandoned infrastructure in favour of paying for "fun" projects like downtown arenas (ours costs the taxpayer roughly 4.5 million/year in interest costs, which makes the management company quite happy).

Colorado Springs may be showing us the future of civic management:

http://reason.com/blog/2012/11/30/self-reliance-and-tight-budgeting-got-co

Self-Reliance and Tight Budgeting Got Colorado Springs Through the Recession
J.D. Tuccille|Nov. 30, 2012 12:08 pm

Sometimes it takes an outsider's perspective to point out to people the reality that's around them. So it is with Canada's National Post, which surveyed the troubled behemoth to its south, and found an example of Americans responding to recession-shriveled tax revenues and government services by boldly doing stuff for themselves.

As Post scribe Kathryn Blaze Carlson writes, the recession sort of left Colorado Springs in the crapper:

More than a third of the city’s 24,512 streetlights went dark. Some 393 trash cans were removed from 128 neighbourhood parks. Public drinking fountains ran dry and park bathrooms were locked. Buses stopped running at 6:15 p.m. and pools shuttered. Irrigation at city parks was ramped down, yielding thirsty, yellowing, brittle grass. Roads deteriorated into a Swiss cheese of potholes and crumbling curbs.

This was Colorado Springs circa spring 2010. The mountain town was still reeling from the recession, its coffers hit by a steep decline in the sales tax revenues it depends on so heavily. The government was spending more than it was bringing in, it had too many employees, and it was being drained by an unsustainable pension scheme.

And by virtue of how it has handled its fiscal crisis, the city lived up to its reputation as a tax-wary, libertarian outpost in the American frontier.

This is a mainstream media piece using the word "libertarian," so we should assume that Colorado Springs residents responded to hard times by resorting to cannibalism and emulating the plot of Road Warrior, right? Not so much. Actually, residents voted down onerous tax hikes that would have been spent on politician-preferred priorities in favor of paying for or providing their own services.

When the lamps illuminating Ralph Kelly’s street were switched off, he and his neighbours together paid the city about $100 to “adopt” a streetlight and reignite a shared bulb. There was also an “adopt a trash can” program, where the city supplied the bin but residents hauled the garbage to privately run participating dumpsters.

The phenomenon extended beyond people's immediate neighborhoods, too.

[W]hen the government shut off the landmark fountain in America the Beautiful Park three years ago, non-profits and residents banded together to raise $25,000 to keep it flowing. When the city considered closing the innercity’s Westside Community Center, the Woodland Valley Chapel offered to manage it with only limited municipal support. That partnership, and others like it, continues to this day.

When the police force was slashed and Chief Pete Carey “needed to get innovative,” as he put it in an interview, volunteers became community service officers. They cost 60% less than police officers and can respond to non-injury traffic accidents or even burglaries so long as the thief has left the scene.

A local businessman also formed the City Committee to pore over the municipal books. Not surprisingly, committee members found that spending was nonsensical and wasteful and had Colorado Springs on the road to near-term insolvency.

Carlson does point out that not every neighborhood so effectively filled in the gaps. Residents in poorer areas weren't able to so readily step-in. This certainly, to some extent, represents fewer resources on which to draw to replace tax-funded services. You don't pay $100 to light a street lamp if you don't have it. I have to wonder, though, whether it might not also represent some of the differences in priorities and habits that help to keep people in poverty. It doesn't cost much to haul your own trash — that's actually a popular money-saver in my neck of the woods — or to clean and patrol your own streets. But the article doesn't give enough information to draw firm conclusions on the matter.

Colorado Springs, now recovering, has apparently maintained many of the cost-saving practices it adopted from necessity. The city has also tightened its budgeting practices, including adopting zero-based budgeting, under which budgets have to be freshly justified every year instead of being based on the previous year's numbers.

To judge by the very interesting piece in the National Post, our friends in D.C. might want to spend some of their seemingly endless junket time on a fact-finding mission to Colorado Springs. Oh, yeah. And then actually implement what they learn.

And the link to the National Post article: http://news.nationalpost.com/2012/11/25/colorado-springs-recession/

 

[Edward Campbell]

Here, reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, is a fairly direct answer, in so far as Europe minus a very small handful of exceptional countries is concerned:

http://www.theglobeandmail.com/report-on-business/international-business/european-business/tech-drives-nails-into-coffins-of-europes-weak-economies/article5856181/

The handful of countries that are able to exploit technology to create "new" jobs share a few common traits:

1. They are not illiberal ~ some, like Japan and Singapore are deeply conservative and others, like Finland and the USA are very liberal but it appears to me that the more illiberal traits a country possesses - generally displaying a fondness for statist solutions that promote equality of outcomes at the expense of opportunity, which reward failure and punish success, and which are suspicious of private property (read Ontario and Quebec in 2012) - then the less likely it is to survive in the 21st century as anything other than a colony of some sort;

2. They have a well educated population; and

3. In part to counter the top, negative attribute, they have efficient, effective "social welfare" regimes that includes cost effective medical care for all.

The above, from the "Why Europe Keeps Failing" thread and this recent article in the National Post about our free trade negotiations with the EU shows why Canada is not anywhere near as "productive" as it can be, should be and must be if it wants to survive as something other than an American colony.

Productivity is nothing more than how well we use our resources - natural, human, financial and cultural - to produce goods and services that we and others need and want to buy. We are a blessed country and, for more than 30 years, for a whole human generation, we have "grown" our economy one only one of those resources - natural resources. ALL of our growth has been due to the high market demand for resources (uranium, potash, oil, etc); i say ALL because our productivity, relative to the USA, has actually declined in 30 years - we have gotten richer despite being less and less efficient.

Productivity is NOT about lazy workers. In fact the cost of labour is a relatively minor part of the productivity equation. We have a good, well educated labour force; we have abundant natural resources; our currency and banks are sound; but we get less and less "productive." Why?

The answer lies in the fourth item: our socio-political culture.

While, in the past 150 years, our economy has transformed itself from agriculture and resource extraction (hewers of wood and drawers of water) to industrial and on to services, our social culture has remained stagnant, rooted in a combination of Bismark's German social programmes circa 1885 and French Canadian statism. Equally, our political culture is incredibly conservative: risk averse and resistant to reform. Even our innate Scots Presbyterian parsimony is unable to counter the effects of statism and timidity. Remember when Brian Mulroney tried to reform old age pensions by, sensibly, "de-indexing" them in 1985? It was good, even innovative policy but a little lady named Solange Denis shouted "You lied to us ... I was made to vote for you and then it’s good-bye, Charlie Brown!” Mulroney lost his nerve and no politician, not Jean Chretien and not Stephen Harper, has developed any guts in the intervening 25+ years.

BUT: our social programmes, the set of policies that Canadians claim, over and over and over again, "define" us as a people, are ALL wrong. They are, taken individually and collectively either or both inefficiently designed or unaffordable.

The only things that have kept us from going broke in the last 30ish years are:

1. The strong market demand for natural resources; and

2. The fact, and it is a fact, that our main competitors have polices that are as bad or worse than ours.

BUT: the resource market has always been cyclical plus big resource consumers, like China, are developing other, competitive markets, hoping to drive supply up and prices down. Further it is not clear that the USA, our main competitor, can avoid reforming its own social programmes in the face of a real economic/productivity crisis. If they do reform then we will either have to follow suit or fall even further behind.

 

[Edward Campbell]

And see this for a graphic description of out-of-control social programme spending ... in the USA, but equally applicable to e.g. Ontario.

 

[a_majoor]

Interesting take on where the real problems in productivity and "dead money" really lie:

http://opinion.financialpost.com/2012/12/04/jack-mintz-dead-money-is-in-government/

Jack Mintz: ‘Dead money’ is in government

Jack M. Mintz | Dec 4, 2012 8:17 PM ET

Bloated bureaucracy worse than prudent cash holding at firms

Imagine you are running a multi-billion dollar corporation, deciding on investment plans for the coming year. The North American economy is eking out growth barely above 2%. Uncertainty over budget discussions in the United States could mean a downturn in the coming year. Europe, which has stalled altogether in growth, could witness a major euro crisis as sovereign bad debt continues to pile up. China and other emerging economies that have been significant sources of growth have slowed down as well.

With growth stalling, would you invest billions of your cash flow at this point of time? Perhaps, if you see your market might be in good shape during the coming year. But if the market is hardly growing, you won’t want to stick your head out to put money in potentially low-return investments.

You could make a dividend payment or buy back shares to give cash to your investors instead. However, if things turn out much better than hoped, you would be better off keeping your cash to buy cheap assets or invest in major projects. So the best strategy is to carry cash flow to buttress against any liquidity crisis, as well as to take advantage of profitable investment opportunities, including buying cheap assets.

Since the financial crisis of 2008-09, corporations have been accused of carrying so-called “dead money.” Yes, it is true that cash flows as a share of assets have increased, but it has been done for good business reasons. And Canadian companies are more prudent than American companies by holding more cash as a share of net assets, perhaps due to our more resilient economy. After all, the U.S. has had a much bigger and longer recession than Canada, depleting cash flows.

Indeed, we have benefited from prudent non-financial corporate financial decisions this past decade. Keeping debt to reasonable levels, Canada avoided a sharp surge in corporate bankruptcies that could have led to far greater unemployment during the Great Recession.

Although the 2008-09 recession led to a rise in the corporate-credit-market debt-to-equity ratio, from 56% to over 61%, it has fallen back below pre-recession levels to 55%. Investment in machinery and structures plummeted in 2009 to 6% of assets from 9% at the peak in 2007. By 2011, it has recovered to over 8% of assets.

Yet, in the past couple of years, various critics, including some academic think-tanks, labour union leaders and even central bankers have criticized companies for holding “dead money.” The latest salvo comes from a report from Ontario’s Institute for Competitiveness and Prosperity. While it made several reasonable recommendations, its report unfortunately succumbed to the catchy but misleading theme that companies hold dead money. If such money were deployed, Ontario would boom, so the report erroneously contends.

Luckily, “dead money” folks are not managing our corporations. Otherwise, investors might want to run to the sidelines and pick something else for investments, like copper or potash. Money invested poorly in projects when the market is slowing or potentially at risk could hurt profits badly.

Experts are on the right path when they criticize Canada’s poor productivity performance in that output per worker has been growing less slowly than in the United States. Business output per worker especially remains disappointingly low and we do need to address this issue. While investment in new technologies and new vintages of capital has improved, Ontario still lags the faster-growing areas of North America.

In recent years, federal and provincial governments have put in place better tax policies to encourage investment by lowering corporate and capital taxes, and harmonizing provincial sales taxes with the federal GST. Many governments have also heavily invested in infrastructure and education. Even though such policies have improved the investment climate, something is still amiss, since productivity still lags.

Fingers are often pointed at business leaders being poor managers and less technically savvy. Perhaps that is the case. However, I don’t think we should let governments off the hook yet. They still have a lot of policies that coddle the business sector.

It is not hard to look at a long list of bad policies that undermine growth. Business subsidies continue unabated, including supply management in agriculture, low-interest loans, regional handouts and bailouts for money-losing companies. Regulations protect businesses from competition in sectors such as finance and telecommunications. State-owned entities operate at a large scale, especially in power and health markets. Numerous federal and provincial tax preferences are targeted to the slower-growing large and small business sectors.

A close look at Ontario itself would suggest room for a number of growth-enhancing policies. The province stalled its corporate tax reform, making it unlikely to happen for years to come. It is reluctant to clean up its distorting energy policies, with an inefficient state-owned enterprise controlling the market and with excessive subsidization of inefficient alternative energy, to the detriment of low-cost sources of energy such as natural gas. While the province has significantly improved its education and health services in recent years, its deficit remains insufficiently controlled, perhaps as a result of expensive public policies designed to win re-election rather than to improve the economy.

If there is any “dead money” lying around, it probably could be found in inefficient spending and tax programs and bloated bureaucracy.

Jack M. Mintz is the Palmer Chair, School of Public Policy, University of Calgary.

 

[a_majoor]

And a warning. The "Big Data" fad may have interesting managerial consequences (mostly to do with being able to do pattern analysis after the fact), but I can see calls for this to become bureaucratic "standard practice", including calls for ever more personal data to be delivered over to government agencies in order for them to usd "Big Data" analysis to operate ever more "efficiently"

AS Corcan reminds us, F.A. Hayek had recognized the flaw in that sort of thinking as far back as 1945, and in economic, social or ecological systems, we are dealing with mathematically "chaotic" systems with thousands of millions of inputs and non linear responses. No matter how "big" your data set or how fast your computers and algorithms, you will always be behind the curve (and using up more and more resources to do so):

http://www.nationalpost.com/Data+Hayek+Dead/7649239/story.html

Big Data: Is Hayek Dead?

Terence Corcoran, National Post · Dec. 4, 2012 | Last Updated: Dec. 4, 2012 12:03 PM ET

Many decades ago, The Economist declared "Keynes is dead," not as an obituary for John Maynard Keynes, the great 20th century British economist, but as a declaration on the demise of his interventionist economic theories. As we know, Keynes was resurrected, which is why much of the world is now waist-deep in unsustainable debt amid little growth -- as predicted by one of Keynes' arch ideological enemies, Friedrich Hayek.

Hayek fought hard against most of Keynes' ideas, denouncing government planning and spending and favouring free markets. Given the state of government policy around the world, it's beginning to look like it's time to ask the question: Is Hayek dead?

Hayek also appears to be under subtle reversal in the private sector, especially among the purveyors of management theories. Today, one of the hottest corporate ideas is how "big data" can -- nay, must -- become a core focus of every business on the planet. In a recent cover story, "Getting Control of BIG DATA," Harvard Business Review (HBR) hailed the arrival of a managerial revolution. As I write this, the Big Data World Congress is underway in London. Major consultants and data management firms are running big-data ads . The people who analyze big data -- "data scientists" -- allegedly have "the sexiest jobs in the 21st century."

Two MIT academics, Andrew McAfee and Erik Brynjolfsson, are leading big data revolutionaries who wrote HBR's cover story. "As the tools and philosophies of big data spread, they will change long-standing ideas about the value of experience, the nature of expertise, and the practice of management. Smart leaders across industries will see using big data for what it is: a management revolution."

Here's another dose of revolutionary fervour from McKinsey consultants -- global managing partner Dominic Barton and David Court, head of the analytics practice: "Managers also need to get creative about the potential of external and new sources of data," going on to list a terabyte torrent of everything from social media conversations, photos and video to external measurements of local demographics and even weather forecasts.

So what's Friedrich Hayek got to do with any of this? In their HBR piece, Barton and Clark urged wide adoption of big data analytics. "One way to prompt broader thinking about potential data is to ask, 'What decisions could we make if we had all the information we need?'"

That's pretty close to a question Hayek posed -- and answered -- more than half a century ago. He called it the "economic calculus" problem. In a 1945 essay, "The Use of Knowledge in Society," he wrote: "Even the single controlling mind, in possession of all the data for some small, self-contained economic system, would not...go explicitly through all the relations between ends and means which might possibly be affected."

Hayek's warning was aimed at the menace of central planning, but it likely also applies to big data corporate planning. Regardless of volume and quality, he said, data and statistics are about the past and are notoriously incapable of predicting even the smallest of changes in economic behaviour. Big data may have uses, but a management revolution based on terabytes of data and YouTube views? Let's hope Hayek isn't dead yet.

---------

Terence Corcoran is editor of Financial Post Magazine tcorcoran@nationalpost.com

 

[Edward Campbell]

There's a reason I hoped Mark Garneau would join the Liberal Party of Canada leadership race; he has, as I have said, gravitas, which is on display in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail:

http://www.theglobeandmail.com/news/politics/marc-garneau-new-taxes-and-spending-cuts-arent-the-only-things-government-can-do/article6019750/
My emphasis added

New taxes and spending cuts aren’t the only things government can do

MARC GARNEAU
The Globe and Mail

Published Thursday, Dec. 06 2012

Today, across the country, Canada’s governments – federal, provincial, territorial, municipal – face the same challenge: slow economic growth in the medium term. A weakened Europe and a burgeoning U.S. deficit have led to volatile markets and weak global demand. The effect has been slow job creation and stubborn deficits across the country.

As policy makers, as Canadians, we debate the best course of action. Stuck between the desire to balance budgets while maintaining essential services, our politics have distilled our choices to two: raise taxes or cut spending.

Where the NDP have proposed new taxes on those who generate higher incomes, the Conservatives have rejected any tax increases, opting instead for deep cutbacks on spending.

Not just in Canada, this debate rages across the globe. In response to the euro crisis and in response to the U.S. “fiscal cliff,” the debate is locked on how much to raise taxes and how much to cut spending on programs such as Medicare and Social Security.

But must we face such a dichotomous choice?

Canada is now relatively unique in the developed world. Because of sound fiscal management in the 1990s and strong resource sectors, we have been left relatively unscathed from the Great Recession. This despite some serious structural weaknesses in Canada’s economic competitiveness.

In its most recent economic forecast, the Organization for Economic Co-operation and Development (OECD) noted Canada’s poor competitiveness in export markets. For decades, Canada’s productivity growth has been weak. Today, the average Canadian worker produces 20 per cent less than U.S. workers, and the trend is getting worse. Our lacklustre productivity means that Canadian workers make less for each hour worked compared to many of their counterparts in other OECD countries.

Compared to other nations, Canadian businesses invest less on workplace training on a per-capita basis and our business investments in information technology, R&D and innovation remain weak. Canada is now losing ground in key sectors in the global economy: advanced manufacturing, telecommunications and health sciences, to name a few. Today high-tech is less than 2 per cent of the TSX.

In short, Canada’s economy is failing to meet its potential.

Yet, in this global downturn, despite our poor competitiveness, Canada has emerged with relative strength. This is an opportunity. Rather than coast on our low-hanging fruit, our natural resources, if we tackle our known weaknesses, if we are smart and invest, we can build Canada into an even stronger global economic force. We can carve out new niches of comparative advantage, build new globally competitive businesses that will create thousands of jobs here at home. We need to be aggressive while our competitors are at a disadvantage. Now, is our time to get a leg up.

And growth is the key. Rather than choose higher taxes or spending cuts, let us invest wisely to build growth and growth will bring higher incomes, greater prosperity and tax revenues to fund services.

But many a politician has sold the promise of economic growth to solve all problems. The reality is economic growth is slow to build. I will not sell false promises – in the short-term, in order to bring the federal budget closer to balance, spending will need to be restrained.

In the long run however, economic growth holds the key to preventing even deeper cuts, particularly given the looming demographic shift. And Canada’s weak competitiveness is the evidence that shows that this is possible. Our unmet potential means we have the potential to grow.

But we must stop tinkering. For decades, governments have failed to get the job done. Giant novelty cheques used by politicians for photo ops and Economic Action Plan ads are not enough.

Let’s get rid of special tax preferences and make our tax system more efficient. Instead of government handouts, let’s free markets to carve out new sectors, develop new technologies and with it new jobs. Let’s make sure skilled new Canadians and young Canadians are integrated quickly into the workforce and we grow our companies into global leaders.

The choices we face need not be stagnant ones, unpalatable choices of tax increases or deep spending cuts. There is another path. We must simply be bold enough to take it.

Marc Garneau is the Member of Parliament for Westmount Ville-Marie and a candidate for the leadership of the Liberal Party of Canada.

This, the highlighted bit, anyway, could have been written by someone like David Dodge, Don Drummond or Kevin Lynch; it should have been written by Stephen Harper, Jim Flaherty or Christian Paradis. It is sound policy ... but, sadly, not very good politics, productivity is not sexy.

 

[GAP]

Gee....I seem to remember similiar grand designs from the Liberals before.......I can't seem to remember them ever actually delivering them.....

 

[a_majoor]

If people like Martha Hall Findley and Marc Garneau keep expounding on what would seem to be traditionally Conservative (if not Reform) ideas like elimiating marketing boards and improving economic productivity, then perhaps they are making a play for the "Blue Liberals". It is either that or they are sleeper agents for the CPC.

Anyone know roughly what proportion of the LPC is actually "blue"?

 

[a_majoor]

Back to the economy. Using the economic freedom index to rate Premiers is good idea:

http://fullcomment.nationalpost.com/2012/12/07/jesse-kline-the-best-and-worst-premiers-of-2012-and-why-it-matters/

Jesse Kline: The best, and worst, premiers of 2012 — and why it matters

Jesse Kline | Dec 7, 2012 10:12 AM ET | Last Updated: Dec 7, 2012 10:48 AM ET
More from Jesse Kline | @accessd
Andrew Vaughan/The Canadian Press

Over the past few months, the Fraser Institute has been releasing detailed lists pertaining to economic freedom — a measure that offers a key indicator of how well the economies of various jurisdictions are doing.

The latest is a report that ranks Canada’s provincial premiers during the 2011-12 fiscal year, based on three measures — government spending, taxes, as well as debt and deficits.

Kathy Dunderdale of Newfoundland and Labrador, New Brunswick Premier David Alward and Saskatchewan’s Brad Wall were the top three, respectively. The much-maligned former premier of Alberta, Ed Stelmach, came in fifth, while the soon-to-be-former Premier of Ontario, Dalton McGuinty, came in eighth, with Manitoba’s Greg Selinger coming in dead last.

More than just giving some regions bragging rights, these rankings are important because they show how well each province’s respective premier is safeguarding the long-term economic interests of their province.

Premiers who scored higher were able to reduce expenditures or, at the very least, keep increases in line with inflation, and avoid increasing deficits and debt. All important since we want to avoid saddling future generations with debt. Low levels of taxation also help drive provincial economies by attracting people and businesses to the province. Those who lowered taxes or maintained low-tax environments scored higher in the rankings.

The findings are even more important when they’re put in the larger context of economic freedom. The top five countries on the Fraser Institute’s Economic Freedom of the World index include Hong Kong, Singapore, New Zealand and Switzerland, with Canada and Australia tied for fifth. Venezuela, Burma, Zimbabwe, Congo and Angola are at the bottom. Which countries would you rather live in? Which would you rather be arrested in?

Economically free countries not only have better protections for property rights, civil liberties and the rule of law, they outperform less free countries on almost every measure, including: income, poverty, the environment, life expectancy, corruption, infant mortality and rates of unemployment.

Take Chile, which ranked 10th in terms of economic freedom, and Venezuela, which placed 144th. Chile has about half the poverty rate of its South American neighbour, and an inflation rate of 1.7%, compared to 29.8%.

The difference between Canadian provinces will obviously not be so stark, as our Constitution guarantees us certain rights and a comparable level of government services. But there are still telling differences between the most free provinces and the least.

The ranking of provinces in terms of economic freedom, for example, is almost exactly the same as listing them by GDP per capita. In 2011, GDP per capita in Alberta, the most free province, was $72,713; in the least-free province, Prince Edward Island, it was $33,467.

Unemployment rates across Canada do not correlate exactly, but there’s a large gap between the most, and least, free provinces: At the top, Alberta and Saskatchewan’s unemployment rate in 2011 was 5.5% and 5% respectively. On the other end of the scale, P.E.I.’s rate stood at 11.3%, followed by Nova Scotia at 8.8%.

Just as we see at the international level, jurisdictions with more economic freedom tend to have better economies. Knowing this, we can see how the performance of our current provincial leaders can make a world of difference.

Albertans, who enjoy the most economic freedom in North America, have benefited greatly from a strong economy. But the fifth-place ranking received by Mr. Stelmach, who was in office for more than half the year examined by the study, should give us pause. Especially since Alison Redford has doubled-down on his bad economic policies.

Ontario and Quebec, which were once the powerhouses of the Canadian economy, have been stagnating for years under Liberal leadership. One can only hope Pauline Marois and whoever replaces Mr. McGuinty will do a better job. Just don’t hold your breath. The Atlantic provinces have also been struggling as of late, but if Ms. Dunderdale and Mr. Alward continue to be strong fiscal managers, their provinces have a good chance of turning things around.

So while ranking the premiers may seem like little more than a top 10 list of the best, and worst, country songs of the year, it actually provides Canadians with useful information about their elected officials. By understanding how our provincial governments impact our ability to live and work, we can do a better job of holding them to account in the future.

National Post
jkline@nationalpost.com

 

[a_majoor]

Using (gasp) market forces to deliver goods and services to the public. What will they think of next </sarc>

Once ideas like this catch on, we should expect to see them applied to more and more things that are presently exclusively done by governments and bureaucracies. If anyone wants to use the slur "American style health care" in applying this model to health expenditures, calmly reply you are advocating "Singapore style health care" (you can also insert "Singapore style" to any other expendature as well):

http://opinion.financialpost.com/2012/12/07/lawrence-solomon-move-into-the-fast-lane/

Lawrence Solomon: Move into the fast lane

Lawrence Solomon | Dec 7, 2012 9:44 PM ET | Last Updated: Dec 7, 2012 9:46 PM ET
More from Lawrence Solomon

U.S. Dept. of Transportation Some U.S. toll lanes are already dynamically priced to reduce ­congestion.

U.S. has pioneered dynamic pricing of highway toll lanes

Toronto taxpayers face a 10-year, $500-million-plus bill to repair their badly crumbling and congested Gardiner Expressway, after which they would become owners of a badly patched and congested expressway. Other proposals for this 60-year-old money pit, such as replacing the elevated portion of the expressway with at-grade or below-grade roads, could cost taxpayers two to three times as much without relieving congestion — because the land adjacent to the expressway is fully developed, it can’t be widened to provide commuters with ­relief.

Taxpayers aren’t much better off in Montreal, Vancouver or fast-growing Calgary, which is now contemplating a $1-billion bill to contain ever-more frustrating traffic congestion.

Canada’s taxpayers have a better option, one that taxpayers around the world are increasingly adopting: Turning the expressways, and other roads, over to toll-road operators. Instead of taxpayers footing the bill for the roads, drivers would. To make the deal even sweeter for taxpayers, they would get a share of the toll revenue.

To also make it sweet for drivers, the toll roads operate electronically via transponders and eliminate congestion by varying the toll on the fly. Whenever the road has spare capacity, the toll drops to draw in more drivers; as the road starts to become congested, the price progressively bumps up to peel drivers off as necessary. Such dynamically priced roads are free-flowing, able to guarantee their customers a congestion-free drive without worrying that a traffic jam will cause them to arrive late for work, or miss their flight, or pay hefty late penalties at the daycare.

Georgia’s Interstate 85 provides one model of how dynamic prices can work their magic. In previous years, commuters in the metropolitan Atlanta area often needed an hour and a half to get to work during rush hour and yet relief for them seemed impossible — as with Toronto’s Gardiner Expressway, the land adjacent to the I-85 freeway was too built up to allow the road to be widened.

Then Georgia’s road authorities reasoned that if the road system couldn’t become more extensive by building out another lane, it would need to become more intensive by increasing the throughput on existing lanes. The highway’s outside lane, previously reserved for high-occupancy vehicles, was converted to also allow toll-paying customers over a 16-mile stretch of the highway.

Last October, when the tolled lanes — dubbed the Express Lanes — made their debut as dynamically priced lanes, they attracted a ton of bad publicity from drivers angry at having to pay a toll and angry at bureaucratic bungles that accompanied the new service. Many swore they would never use the road and at first many didn’t — drivers made just 7,237 trips on an average weekday that first month, paying an average of $1.19 per trip. Soon, the kinks in the service began to be cleared up and drivers in the slow lanes, seeing cars zip by them in the Express Lanes, mellowed in their opposition.

By January of this year, the average weekday saw 11,623 trips, and drivers were paying an average of $1.26 per trip. Over the course of the year, more and more people decided to give the fast lane a try, particularly when they needed to be somewhere on time, leading to a steady increase in use of the Express Lane as well as an increase in the toll that customers were willing to pay.

By October of this year, the most recent month for which figures are available from the Georgia Road and Tollway Authority, drivers were making 17,701 daily trips, more than twice as many as at the start, and paying an average of $1.51 a trip, typically over $5.00 at rush hour. Friday morning’s rush hour set a new high of $6.35 for the 16-mile trip.

The Express Lanes now reach their capacity during the morning peak, often moving an impressive 1,800 to 2,000 vehicles per lane per hour without the enervating congestion of old. Opposition to the toll road has all but disappeared.

Because of Georgia’s need for money to fund its road system and because of the system’s success — in the first year the number of drivers acquiring transponders hit 100,000, triple the 35,000 predicted, and the number now exceeds 150,000 — Georgia will be relying more and more on electronic tolls in the years to come, as will much of the US. Over 20 metropolitan areas in the U.S. are either planning some form of automobile tolling or already have it in place, in all cases to increase effective road capacity, provide relief for taxpayers, and provide more choices for drivers.

As impressive as are the U.S. schemes, they lag behind Singapore, the first city in the world to implement electronic road pricing and still the leader. Because this highly populated island nation doesn’t have the luxury of sprawling — roads already account for 13% of its land area, about the same as housing — it has been forced to be land efficient as well as cost effective.

Thanks to the road system’s efficiency, the Singapore government has been able to reduce its overall take for roads — it cut taxes related to roads (the island’s road tax and vehicle registration fees) by far more than it increased tolls raised from drivers. Trials now underway in Singapore are preparing for a next-generation efficiency that will toll vehicles dynamically based on congestion and distance along city streets across the entire island.

The EU, too, is moving in this direction — a meeting in Berlin this week had as a focus congestion pricing of automobiles in EU cities, both to relieve traffic and to improve air quality.

Roads are modernizing through tolls that simultaneously improve economies and benefit taxpayers. Rather than throwing more good money at bad roads, Canadian governments should abandon their current dead end and go with the free-flowing roads.

Financial Post

Lawrence Solomon is executive director of Energy Probe and Urban Renaissance Institute and the author of Toronto Sprawls (University of Toronto Press). He also is a director of PEMA, a non-profit that owns satellite toll road technology.

LawrenceSolomon@nextcity.com

 

[ModlrMike]

...with Manitoba’s Greg Selinger coming in dead last.

If there's anything I've learned here it's that once you think the bar's been set at its lowest ebb, someone manages to sneak under it.

 

[a_majoor]

This could be very bad news on several fronts.

The popping of a housing bubble will have very profound effects on the rest of the Canadian economy, most of them negative.

The pain this creates will provide an opening for poplist/leftist parties to crank up the blame machine, win elections and impose counterprioductive policies which will simply prolong the crisis (read the "Forgotten Man" by Amity Shlaes, or look at recent [post 2008] events). Charts on link:

http://princearthurherald.com/news/detail/?id=73027d57-b972-42c8-940f-8147447993d5

The magnitude of Canada's housing crisis
BY HANEEF WALLANI
5 December 2012

Canadians should hold off on buying housing and even consider renting until the inevitable sharp drop in housing prices occur. Hopefully this publication’s readership will hedge their risk accordingly to secure their wealth.

Canada’s housing bubble has escalated to a point where the question is no longer if the bubble will burst but rather the scale of the collapse.  On October 30, 2012 CIBC’s economist Benjamin Tal published a report attempting to downplay the Canadian real estate bubble by claiming it will not be as severe as the crisis that hit the U.S.  However, his arguments ignore several crucial factors that point to the inevitable housing crisis being severe enough to cripple the Canadian economy via a hard landing causing at least a 20% decline from peak housing prices.

For starters, StatCan recently reported that Canada’s household debt-to-income ratio just hit 163%, overthrowing U.S.’s peak of 162%, which they hit just before their housing market toppled (Chart 1).  Although Mr. Tal acknowledges this, he attempts to sidestep this problem by claiming it is a non issue as the debt-to-income ratio for the past three years in Canada is rising at a slower rate than in pre-correction U.S for the same period.  What he fails to mention however is that U.S. consumers had an exponential rise in their debt-to-income ratio for about three years leading to the collapse whereas Canada’s housing bubble has been slowing brewing for the past 10 years, making this statistic completely irrelevant.

Chart 1:



Another point Mr. Tal makes is that the quality of the debt in Canada has not changed dramatically in recent years and that Canadian consumers are in better shape now than their American counterparts when their housing bubble peaked.  What he does not realize is that credit scores only correct themselves after the boom period is over. This is due to banks making major adjustments to credit scores only after the individual is unable to service his or her debt. We see this illustrated in Chart 2 where U.S. credit scores peak right before their recession kicks off.

Chart 2:



Finally, the Bank of Canada and the Canadian Finance Ministry have recognized the problem in the real estate market and have attempted to resolve the issue over the summer.  Jim Flaherty, the Canadian Finance Minister, has spared Bank of Canada Governor Mark Carney from increasing interest rates in this stagnating economy by reducing the amount of home equity that can be taken out from 85% to 80%.  Further, he has reduced maximum mortgage amortization from a 30 to 25 year period.  Unfortunately, these changes have come far too late as evidenced by Canadian consumer debt-to-income ratio having already exceeded pre-correction America’s.  These changes so late in the game will only serve to exacerbate the problem in a market already at its peak and will undoubtedly culminate into a hard landing in the Canadian housing sector.

Benjamin Tal has a lot in common with Federal Reserve Chairman Benjamin Bernanke, when he indicated in that housing prices were a sign of economic strength in America & claimed in 2007 that the “subprime market seems likely to be contained”. Clearly housing prices in the US have deteriorated since his statement and this is a clear example of how economists make light of the severity of the situation. Regrettably, to my chagrin, mainstream outlet CBC has cited CIBC’s report indicating why everything is fine and average Canadians will unlikely take precautionary measures.  Canadians should hold off on buying housing and even consider renting until the inevitable sharp drop in housing prices occur.  Hopefully this publication’s readership will hedge their risk accordingly to secure their wealth.

Sources:

StatCan (chart)

Federal Reserve Board (chart)

CREA (chart)

S&P (chart)

Equifax (chart)

Moody’s Analytics (chart)

CIBC: http://research.cibcwm.com/economic_public/download/cw-20121030.pdf

CBC: http://www.cbc.ca/news/business/story/2012/10/30/cibc-housing-tal.html

Federal Reserve: http://www.federalreserve.gov/newsevents/testimony/bernanke20070328a.htm

Financial Post: http://business.financialpost.com/2012/06/21/ottawa-tightens-mortgage-rules-what-the-analysts-say/

Main Pic: http://buelahman.files.wordpress.com/2009/09/14_housing.jpg

 

[Nemo888]

I agree with Thucydides again. Housing is out of whack. As a percentage of income housing costs have never been this high in Canada(150 years). Going only by historical averages the amount of monthly income dedicated to housing should drop 15 to 20%. More in some cities where a greater percentage of income goes to housing costs. This is not an island, such rampant speculation is unsustainable and will cripple our economy.

 

[a_majoor]

And an argument against a national securities regulator. Most of what a national regulator could "do" could also be accomplished by simply having jurisdictions agree to each other's rules in the case of cross border entities. The EU and the United States have similar issues with cross border regulations as well; some lessons can be derived from their experience:

http://opinion.financialpost.com/2012/12/06/power-to-the-provinces/

Power to the provinces

Bryce C. Tingle, Special to Financial Post | Dec 6, 2012 9:12 PM ET
More from Special to Financial Post

Alberta needs its own rules, not a national securities regulator

Federal Finance Minister Jim Flaherty recently reported that “significant progress” has been made toward creating a national securities regulator. Almost the only explanation for this assessment was that Alberta is apparently now talking to the feds about the project.

Last year the Supreme Court ruled Ottawa could not unilaterally create such an institution. As Alberta represents approximately 27% of Canada’s capital markets, any plausible national scheme is usually thought to require its participation.

The news reports provided little detail about the discussions between the parties, but we can safely guess by examining the concerns that animated Alberta’s fierce opposition to a national regulator a year ago. The governance structure of the proposed national securities commission is the big issue and resolving this question will be so difficult that it is probable the project will fail.

At its base, securities regulation is about how money flows to create, support and grow a province’s businesses. In Alberta’s case, oil companies require vast amounts of capital to find and develop resources. In addition, the perennial hope the province can diversify its economy depends on the financing of thousands of new businesses every year.

Alberta’s arguments in last year’s litigation suggest two compelling provincial interests that would have to be protected in any national scheme. The first is that the national regulator would have to be made almost totally independent of the politicians in Ottawa and Toronto.

Leading politicians in Central Canada have historically felt comfortable running against Alberta and its principal industry. Last month alone provided us with the examples of Justin Trudeau and David McGuinty. Earlier this year, Thomas Mulcair blamed much of the nation’s problems on the province.

Alberta’s concerns might be dismissed as paranoia except that Mulcair leads the second-largest party in parliament, occasionally topping the Conservatives in national polls, and the painful National Energy Program is still within the living memory of Alberta’s politicians.

The obvious problem is that neither Ontario nor the feds are likely to agree to a governance scheme that completely ties its hands. Questions of innovation, job creation, economic development, fairness, liberty, and environmental protection, among others, are all implicated in securities regulation and it is difficult to imagine governments voluntarily giving up their power in these areas. In fact, it probably wouldn’t be right for them to do so.

The second governance issue is actually less likely to be resolved. Almost certainly, the national regulator would be located in Toronto and largely staffed by the Ontario Securities Commission. This is only reasonable: The vast majority of Canada’s financial institutions and investment capital are located in Ontario.
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The difficulty is that the dominance of Ontario-based financial institutions means that a province like Alberta has very few of these institutions itself. Albertan companies may be worth 27% of the total value of Canada’s public businesses, but last year the province received less than 3% of the institutional venture capital in the country. Even oil companies must raise most of their money in Ontario.

The scale of business in the two provinces is quite different as well. Alberta is at the top of the league tables for businesses per 1,000 residents; Ontario is at the bottom. In other words, businesses in Ontario are bigger, while, possibly out of necessity, Albertans are more entrepreneurial.

These differences between the provinces lead to significant differences in their respective securities regimes. Alberta relies on individual investors to a much greater degree to finance its many small companies. With its more abundant sources of sophisticated institutional capital, Ontario restricts the ability of the average citizen to invest.

Alberta advocates rules that facilitate relatively small companies going public (often necessary if money is to be raised from individual investors); Ontario advocates rules that protect institutional investors, occasionally without regard to the costs those rules would impose on smaller companies.

It is telling that the roots of the TSX Venture Exchange are in Alberta. Many of Alberta’s biggest companies got their start as small companies on that exchange or its predecessors, raising money from personal networks of friends and business acquaintances.

Over the past decade, the difference in regulatory philosophy between Alberta and Ontario has been repeatedly visible in debates about the introduction of Sarbanes-Oxley style regulation into the country or the harmonization of the private-placement or exempt-market registration regimes.

The OSC is a great regulator. It advocates rules that seem best in light of the experiences of its staff and Ontario’s circumstances. It is perfectly natural that the regulations it recommends for the country don’t reflect the circumstances and culture in, say, Alberta.

That brings us to the last governance challenge for a national regulator: restricting the influence its own staff can have on securities regulation in Alberta. It is difficult to see how this could be accommodated in any plausible institutional arrangement.

The governance challenges faced in the discussions between the feds and their provincial counterparts are not without precedent. How to manage the very different local economic and cultural circumstances of the provinces was the central issue for the Fathers of Confederation as well.

They solved the problem by giving the power to the provinces.

Financial Post

Bryce C. Tingle holds the N. Murray Edwards chair in business law at the University of Calgary and sits on the exempt markets committee of the Ontario Securities Commission and the securities advisory committee of the Alberta Securities Commission.

 

[a_majoor]

More on how regulatory failure distorts and negatively affects the market. Toronto city council demonstrates the effect at the "micro" scale, but politicians attempting to pick winners and losers in the marketplace is endemic at all levels of government:

http://news.nationalpost.com/2012/12/14/pinball-cafe-closure-over-having-more-than-two-pinball-machines-highlights-absurdity-of-bylaw-bureaucracy-at-city-hall/

Pinball Cafe closure over having more than two pinball machines highlights absurdity of bylaw bureaucracy at City Hall

Chris Selley | Dec 14, 2012 5:39 PM ET | Last Updated: Dec 14, 2012 5:40 PM ET
More from Chris Selley | @cselley
Aaron Lynett/National Post/Files

I’m old enough to remember when video arcades were considered a significant urban blight in Toronto — and not without reason, really. They were like magnets for lowlifes, not least the proprietors. Parents didn’t want their kids anywhere near them — at least no one tries to sell them weed when they’re locked in the basement with the Xbox — and we’re well rid of them. As underwhelming as much of downtown Yonge Street remains, it’s like a family values theme park compared to what it was when I was a kid, let alone in the 1970s.

But should that mean a folksy joint full of vintage pinball machines shouldn’t be allowed to operate on Queen Street West, on account of an ages-old bylaw prohibiting more than two machines in an amusement establishment? Even to ask is absurd. In a sense, the proprietors of Parkdale’s Pinball Cafe seem to have brought their much-lamented demise on themselves: They claim to be victims of city hall, but never even got a business licence, let alone pleaded their case for a zoning change or variance to bring it above board.

Related

    Fun but illegal, The Pinball Cafe closes doors for having more than two pinball machines

But that simply raises a more fundamental question: If someone wants to rent space and put some pinball machines in it, or serve wine on a small patio, or pursue some other inconsequential entrepreneurial ambition, why should anyone at city hall give a damn except to encourage it? These rules don’t trace back to Magna Carta. If we don’t want them any more, we can just get rid of them.

I’m also old enough to remember when Queen Street in Parkdale was a pretty desolate place, where women weren’t necessarily OK with walking around alone at night and there weren’t a whole lot of places to grab a civilized drink or bite to eat. That was a bit more recent. As in 2005. I miss the down-at heels vibe, the cheap rent, Bacchus Roti, the Rhino, the Cadillac Lounge and the Skyline Restaurant. But most of the other great stuff in that booming neighbourhood has arrived since. The house I lived in was recently on the market for an improbable $1-million.

On Oct. 30, city council voted 40-0 to stop the boom in its tracks. At local councillor Gord Perks’ behest, any new or expanded “restaurant, take-out restaurant, rear yard and rooftop patio, bake-shop, place of amusement, place of assembly, or club” is now prohibited for a year.

“All of the sudden, what was supposed to be a neighbourhood shopping area has turned into an entertainment area,” Mr. Perks told the National Post this week. “The streets are packed all night and empty all day.”

Interesting choice of words there. It was “supposed” to be a neighbourhood shopping area … says who? Is the terribly misnamed Entertainment District “supposed” to be full of greaseball nightclubs? Is Danforth and Woodbine “supposed” to be a dump? Was Ossington Avenue “supposed” to be an anonymous stretch of tumbledown miscellany before bars and restaurants started colonizing it, and council imposed a similar “interim control by-law” to slow things down in 2009?

(That’s the good news, at least: Look at Ossington today and it’s pretty clear not even city council can stop progress in this city.)

There is a philosophical debate here about city-building: Either you think a popular new restaurant or bakery might threaten a neighbourhood’s fundamental essence, and that politicians ought to try to stop it; or you think a neighbourhood should be allowed to transform organically as the tastes and needs of its residents and business-owners, and everyone else in the city, evolve. To my mind, the latter happens anyway; it can’t be stopped in a fundamentally free society like Canada.

But it could certainly be freer. If a city councillor finds himself advising a new business in his ward that he needs to go to the Committee of Adjustment because a bylaw says he has one too many pinball machines, that councillor should make it his business to advocate getting rid of that stupid bylaw — and many others besides, hopefully. Council itself seems to be barrier enough to progress. We don’t need all this red tape as well.

National Post
cselley@nationalpost.com

 

[Old Sweat]

Andrew Coyne reports on the lack of growth in income inequality in Canada, and the Toronto Star's take on it, in this piece from the National Post's site which is reproduced under the Fair Dealing provision of the Copyright Act.

Andrew Coyne: Every one of the ailments we imagine ourselves to be suffering is a reality in the U.S.
Andrew Coyne | Dec 14, 2012 7:58 PM ET | Last Updated: Dec 14, 2012 9:39 PM ET

It was perhaps the most shocking headline ever to appear in the Toronto Star. “Income gap isn’t growing,” it ran, citing a “TD bank report.” Sure enough, the report found that income inequality in Canada has remained more or less flat since the mid 1990s. As if that were not alarming enough, it found median household incomes in this country grew steadily over the same period, to the point where they now exceed those of the United States for the first time in nearly 30 years.

The paper was clearly flummoxed. The story managed to extract a confession from the economist who did the study that he too had been “surprised” by the results (an “absolute stunner”). How to explain it? “Part of the problem,” the story mused — the “problem” being the failure of the data to show rising inequality — “is the way income inequality is measured.” That is, the study looked at inequality of income. But what about inequality of wealth? That could be increasing, couldn’t it? By the time the story appeared online the paper had recovered its composure. “Canadian income gap may be more real than data suggests,” the headline now read.

It shouldn’t really be surprising to find that none of it is actually true
In fact the study didn’t find any trend towards increased concentration of wealth, either. But never mind. The Star can be forgiven for its astonishment. Because if there has been one article of faith in recent years, not only in the Star but throughout the media, it has been that Canada is beset by “growing inequality,” to say nothing of “stagnating incomes.” Throw in the “vanishing middle class” and you have a catechism of media verities, repeated endlessly, just as if they were real.

And yet it shouldn’t really be surprising to find that none of it is actually true. It didn’t take a study by the TD Bank’s chief economist to disprove it. The evidence was sitting there the whole time on Statistics Canada’s website. All anyone had to do was look.

That’s not to say that income inequality was not growing in the past. Between 1989 and 1998, the Gini coefficient for Canada — a measure of inequality with 0 representing perfect equality and 1 being perfect inequality — increased from .38 to .42. It just hasn’t budged since then. (Possible Star headline: Income gap fails to narrow.)

Another way to look at inequality is to compare the fortunes of people in different income groups, usually quintiles (fifths), over time. Here again the picture is of stability, not stratification. As the TD economists found, incomes in the bottom quintile have grown by 20% since 1998, to 18% for those in the upper quintile. Again, while there was some widening of the gap in earlier decades — from 45% in 1976, the share of income going to the top fifth had increased to 50% by the mid 1990s — it has since held steady.

The picture is even brighter if you consider inequality in yet a third way: as the difference, not between rich and poor, but between the poor and the middle. The proportion of people living below Statistics Canada’s Low Income Cut-Off, a relativistic measure based on the proportion of its income a poor family would have to spend on necessities to maintain itself in the same style as the average family, has fallen from 15% in 1996 to 9% in 2010 — the lowest it has been since at least 1976. A more strictly relative measure, the number of those living below one-half the median income, shows no trend over the same period.

Why was income inequality growing before, and is not now? The explanation is very simple. In the early 1980s and early 1990s, Canada went through two nasty recessions — the first deeper, the second longer. Whenever there is a recession, and for some time after, more people are out of work for at least part of the year, and as such earning very little income. That drags down incomes for those at the bottom — hence increasing both poverty and inequality — but also for the median.

In the past two decades, however, Canada has experienced more or less uninterrupted growth. Hence falling unemployment, hence declining poverty, rising incomes and flattening inequality. Why has none of this registered in the public mind? Why have we heard nothing of the record low numbers living on low income? Why is it common knowledge things are getting more unequal, when in fact they are not?

One reason is that we have changed our definition of inequality. Instead of looking at the gap between rich and poor, or the poor and the middle, attention has shifted to the gap between the very rich and everyone else: the top 1%. Yet even here the “growing gap” is no longer growing. The share of all income going to the top 1%, according to figures provided to the TD by Michael Veall, the reigning Canadian expert on the subject, was 13.6% as of 2010, down from a peak of nearly 16% — again, about where it was in 1998. The big surge was in the decades before that.

So again: how have we convinced ourselves it is increasing? One is forced to conclude it is the influence of the American media. Every one of the ailments we imagine ourselves to be suffering is a reality in the United States: where our incomes are growing, theirs are stagnating; where poverty here is at record lows, there it is at record highs; where inequality in Canada has not grown in recent years, in the United States it has surged.

Again, the explanation, at least in part, is not hard to find. While we have been largely spared the ravages of recession in the last decade, the Americans have endured two, the last especially severe. The big surprise in that TD study, it would seem, is that Canada is not the United States.

 

[a_majoor]

Politics is on our side in terms of energy investment, and will be until at least 2014 (and more likely 2016). Best take advantage of our window of opportunity:

http://blogs.the-american-interest.com/wrm/2012/12/17/us-vs-canada-in-the-energy-revolution/

Canada Leaps Past Dithering US in Energy Race

Energy companies are already focused on the shale boom in the U.S., but now they are increasingly turning to America’s neighbor to the north. Both the U.S. and Canada are sitting atop massive quantities of oil and gas that could fetch high prices on the world market. Both countries face unique sets of challenges in getting that energy to market.

One columnist at the FT, Ed Crooks, is arguing that, despite America’s many advantages, Canada may be a better bet for companies looking to export LNG (liquefied natural gas) overseas. His chief concern is the U.S. political climate, which has yet to adjust to America’s new energy wealth, and its skepticism when it comes to exporting domestic energy:

    Many manufacturers worry that allowing unrestricted LNG exports would erode . . . competitive advantage. Andrew Liveris of Dow Chemical, for example, has warned about the risk that higher Asian gas prices, linked to the price of oil, could “bleed back” into US gas prices.

    A study commissioned by the US Department of Energy from NERA Economic Consulting, published early this month, played down that risk, concluding that even unlimited LNG exports would raise US prices by at most a little over $1 per mBTU.

    Still, the government seems in no rush to give the green light to the 19 proposed new US LNG export projects. Only Cheniere Energy’s Sabine Pass project in Louisiana has so far been awarded a licence to export gas to countries that do not have a free trade agreement with the US, and the energy department said it would begin to review applications for more “on a case-by-case basis”.

    Mr Liveris has suggested that the government should give the green light to only “a few” projects at first, and he seems likely to get his way.

Canada poses its own set of problems for exporters. Ottawa has the political will to export gas that is still lacking in Washington, but it doesn’t have anything like America’s pipeline infrastructure to easily carry its fuel to international markets. However, as Crooks argues, energy companies believe that “politics is more intractable than geography,” and so they are putting their bets on Canada to win.

For Americans, that would be a shame. We don’t want to take anything away from Canada, but America should be doing everything it can to take advantage of its new energy riches, and we should also be doing our part to stabilize global energy markets (and politics) by ensuring reliable supplies to key friends and allies. Greens should note than an era of cheap natural gas will reduce the use of coal globally, and bend the greenhouse gas curve much more effectively than some of the complex and expensive remedies now under review.

We are optimistic that the U.S. political outlook will change. America, unlike Canada, is still getting used to its role as a global energy powerhouse, and with sixty years of energy imports and insecurity behind them, many politicians and businessmen still haven’t come to terms with this status. As a result, much of our thinking and policy on energy issues is stuck in a late 20th-century mindset, more concerned with keeping access to cheap foreign energy open rather than managing our own. This will change, but adjusting to such a rapid role reversal takes time.

In the meantime, Washington needs to develop an energy policy that promotes prosperity and security while also taking due care to safeguard the environment. This won’t be easy, and there will be a lot of political infighting and bickering associated with the task, but let’s not forget: managing our energy abundance is not a bad problem to have. May God smite us with many more curses of just the same kind. .

 

[foresterab]

This is a huge issue...Liguified Natural Gas...for all of Western Canada.  There exists a number of competitive potential advantages that the US may not have..

1) port capacity is an issue at most major US terminals and due to the safety concerns of LNG space is a premium...Canada has Prince Rupert..which also has an under-utilized rail line
2) World capital acceptance.  Stock exchanges over time tend to develop and Canada has a reputation on both the TSX Venture and TSX as being one of the major hubs for both mining and small oil and gas.  Nasdaq is good for health care and technology stocks and the NYSE is good for major multi-nationals companies.  As a result new players..both small and large are followed closely in Canada for the LNG market.
3) Asian connections.  While I'm not really familiar with Asian based cultures Canada immigrants and history of acceptance has provided some critical connections with many of the markets in Japan, Malaysia...
4) Trade politics.  Nexan and Petronas deals approved by the federal government recently were major wins for the LNG force.  Nexan's takeover by CNOC had major opposition due to drilling rights in the Gulf of Mexico and the US had talked about prohibiting CNOC from operating in the US despite most of Nexan's assets being located outside of North America.  Petronas has been a major investor in the LNG development alongside of Shell (Royal Dutch Shell anyone from Europe?? They have a few dollars to their name) on the BC west coast.  Canada has shown that foreign capital and investment in Canada is welcome but without alot of the politcal rhetoric of our southern neighbor.
5) This affects all of Canada as eastern Canada has large potential deposits especially in Quebec and New Brunswick.  Test drilling in both jurisdictions have been promising but legislation and physical transportation infrastructure remain stumbling blocks.  As technology is proven up in the western Canada the east stands to gain from both the success and failures.
6) A growing national awareness of oil and gas and it's impacts (both good and bad).  When half of Canada is paying for fuel based off of world market Brent Crude ($108/barrel currently) and half is selling oil at West Texas Intermidiate at $88/barrel or less (heavy oil is up to $20 per barrel less than WTI on the open market) there is an obvious economic impact to Canada...in part due to a lack of infrastructure East/West for products.

Lots going on but it should make for an entertaining next couple of years.