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Making Canada Relevant Again- The Economic Super-Thread

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Hi Brad,

While I agree with your reluctance to build "too big to fail" institutions, either "national" or "private", I do think there is a role for our national government to create the environment to allow individual Canadians to make decisions that, in turn will allow them to prosper.

We generally accept that Infrastructure is a governmental responsibility.  That is where I accept the need for a "Strategy".

No, I would not have the government invest directly in an oil pipeline.  But I would have the government reduce taxes to encourage the development of a pipeline.  I would have the government reduce taxes to encourage the development of a local ship design, maintenance and registration capability (note I do not, necessarily include manufacture which I continue to believe is outside of our ability to deliver cost competitively). I would have the government support the construction of a shipping terminus for our goods.  I would also have the government support the provision of a "Constabulary Navy" capable of "Policing" OUR highways on the Pacific Ocean.

The last part is crucial.  Just because other people are policing those shipping lanes just now doesn't mean that we can afford to take a free ride on them.  If we aren't participating in the policing then we don't get to write the rules as to how and when they should be policed and can ultimately find ourselves barred from using the highway by those that are doing the policing.  To prevent that occuring we need a pretty big "Policeman" of our own capable of facing down the "Other Guy's" Policeman.
 
A strategy for trade and commerce, involves two key players:

1. Governments that use tariffs and subsidies to encourage trade in one/some direction(s) and to discourage it in others and provide trade officials in selected countries to help Canadians find, secure hold markets there; and

2. Trade association that organize e.g. Team Canada missions and provide information and encouragement to the individual members of their specialist groups (manufacturers, resource industries, services, etc).
 
Tariffs and subsidies have been, and therefore will be, gamed by established players and negotiable politicians to hinder economic growth.

The first element of a useful strategy is to ensure there can be no gatekeepers with the political power to close the gate behind them.
 
I don't foresee the day that we will ever be able to guarantee that following governments won't reverse the decisions of their predecessors.  In fact I am not sure that I want to see that day: partly because of the vagaries of everything and partly because it is part of the democratic process that allows people to redirect their governments..... unless I misconstrue your point Brad.

With respect to the strategy issue - Is it really necessary for governments to supply trade officials?  How about just supplying letters patent or royal warrants to the privateers and let them have at it?  That produced Calcutta, Singapore, Hong Kong and York Factory.

What value are government officials if the government being represented doesn't have the local clout, either through lack of resources or lack of will, to influence events?

While I like the notion of Trade Associations the ideal, to my mind, is not Team Canada missions but rather EFTA, the European Free Trade Association.  That association brought the discipline of like-minded neighbours to the internal trade as opposed to the imposed regimes favoured by the UN and the EU.  Team Canada, does not, to my mind suggest a Trade Association so much as a Trade Expedition having more in common with Radishes and Gooseberries expeditions to Hudson's Bay.
 
The problem "might" be self correcting given the power of the market.

The United States has great attraction to most Canadian business for the reasons that have been outlined earlier, but new centers of gravity are emerging (China and India) while the old center is undergoing a period of turbulance and relative decline. These sorts of conditions will draw the smartest and most energetic business people's attention.

As well, the notion that "culture" plays a large part in investment and business decisions will also have a role here. Canada has received a huge inflow of people from China and the Indian sub continent, who are quite comfortabvle and familier with the customs of their homelands. Those who are going into business will see a large, familier marketplace and be drawn towards it.

WRT government's role, Brad is basically saying that more State intervention will simply make the process less efficient, by directly reducing the resources and capital available (high taxes and regulations), and by injecting political rent seekers into the process, so businessperson "A" will be disadvantaged compared to businessperson "B" who is friendly with the dominant political party or bureaucrats, whatever the intrinsic merits of their business.
 
Thucydides said:
...
As well, the notion that "culture" plays a large part in investment and business decisions will also have a role here. Canada has received a huge inflow of people from China and the Indian sub continent, who are quite comfortabvle and familier with the customs of their homelands. Those who are going into business will see a large, familier marketplace and be drawn towards it.
...

Bingo! We are, already, seeing this. The USA has attracted more (proportionately) of China and India's brightest entrepreneurs, but "ours" are already moving to sell their Canadian products into their parents' markets.


Thucydides said:
...
WRT government's role, Brad is basically saying that more State intervention will simply make the process less efficient, by directly reducing the resources and capital available (high taxes and regulations), and by injecting political rent seekers into the process, so businessperson "A" will be disadvantaged compared to businessperson "B" who is friendly with the dominant political party or bureaucrats, whatever the intrinsic merits of their business.


Ah! Seen and agreed.
 
And yet Ontario's premier has already urged the Conservative Government to institute quid pro quo 'Buy Canadian' legislation in retaliation for the American protectionist moves.  Of course Harper would never do such a thing, but a province so dependent on manufacturing goods for the US was bound to push for something that uniquely benefits a small subset of their workforce over the greater good of the economy.

Regionally elected individuals will always have to cater to the wants of regionally motivated individuals.
 
I would so love the Prime Minister to say:

"Suck it up. They Buy American, we sell to the world"
 
Thucydides said:
I would so love the Prime Minister to say:

"Suck it up. They Buy American, we sell to the world"


He will because he doesn't have much choice. We are, already, part of a nearly completely integrated economy - especially as it applies to manufacturing. We do not make everything most much of what we need. "Buy Canadian" is a pipe-dream.

The Americans are more self sufficient but there will be plenty of stuff procured from Canada because the US no longer makes it or no longer makes enough of it.
 
Somewhere in the depths of Army.ca there is a more complete discussion on how New Zealand "privatized" their public service. Yet another example of how things "could" be done.

http://www.officiallyscrewed.com/blog/?p=1266

Beckbytes – Arguing With Idiots About Capitalism II

Posted September 27th, 2009 by TrustOnlyMulder and filed in Beckbytes, Business, Glenn Beck, Numbers Don't Lie, Politics-International, Quotalicious
From Glenn Beck’s new book Arguing with Idiots: How to Stop Small Minds and Big Governmentcomes this clip about privatization corporatization.

A.D.D. Moment – New Zealand corporatized their postal service in 1987. As Cornell professor Richard Geddes notes, that change “led to improvements in efficiency, a 40% reduction in the system’s workforce, a doubling in labor productivity, a decrease in the cost of sending a letter and a decrease in the price of a basic stamp.” And they did it all without impacting service in either rural or urban communities.
 
Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Ottawa Citizen, is an interesting, perhaps even disturbing to some, article:

http://www.ottawacitizen.com/news/China+effect+stuns+education+researchers/2064456/story.html
China effect stuns education researchers
88.3% of young Chinese immigrants go to university, study finds

By Joanne Laucius, The Ottawa Citizen

October 4, 2009

Call it the China effect. An astonishing 88.3 per cent of young Chinese immigrants in Canada go to university -- more than double the figure for young Canadians as a whole, according to a new study.

When community college was added to the mix, 98.3 per cent of young Chinese immigrants sought post-secondary education by the time they were 21 years old.

Ross Finnie, an economist at the Graduate School of Public and International Affairs at the University of Ottawa, expected the figure to be high, but this was astounding.

"These numbers are so high, they don't even seem possible," said Finnie, who crunched the numbers from Canada's sweeping Youth in Transition Survey with co-author Richard Mueller at the University of Lethbridge.

Arthur Sweetman, an economist at Queen's University who has done extensive research on immigrant education and labour force participation, calls them "Generation 1.5" -- immigrants who came to Canada as children and spent at least some years in the Canadian school system.

Generation 1.5 has been thriving in Canada, despite figures that have suggested for the past 20 years that their parents have suffered in the quest for prosperity, says Sweetman.

"Many immigrants come here for the kids. The kids understand that and they work for it."

The numbers suggest not just a brain gain for Canada, but the foundation of an entrepreneurial class with schooling in Canada and one foot in another culture.

Winnie Ye came to Canada from China at 14 with only a tenuous grasp of English. By the time she graduated from Glebe Collegiate in 1996, she was the Ottawa public school board's top graduate.

Ye's parents, both university professors in China, urged her to study medicine, but she decided on electrical engineering at Carleton University.

After a string of scholarships, a PhD and a three-year post-doctoral sojourn at MIT and Harvard, Ye was named the Canada Research Chair in Nano-scale IC Design for Reliable Opto-Electronics and Sensors at Carleton last week.

It's a mouthful -- and a prestigious appointment for so young a scientist. Ye designs devices that source, detect and control light and develops biosensor systems, research that will help create new vaccines and drugs.

Now 32, Ye could have remained in the U.S., but opted to return to Canada.

"I have lived in Canada for half my life. Canada is my home," she says. "The government has invested a lot in me."

Immigrant hustle is nothing new. But the China effect continues into the first generation born in Canada, with 81.3 per cent going to university and 13.6 per cent going to college, Finnie and Mueller found.

The China effect was the strongest in the study, but it wasn't the only one. First and second-generation immigrants from many parts of the world were more likely to seek post-secondary education than those born in Canada. (In the study, second-generation immigrant refers to a child born in Canada of immigrant parents.)

A little less than 38 per cent of non-immigrant youth went to university compared to 57 per cent of all first-generation immigrants and 54.3 per cent of second-generation immigrants, says Finnie, who mined the data from Canada's Youth in Transition survey, which asked in-depth questions of 26,000 Canadian young people who were 15 in 1999.

The survey, which is following that same group as they grow up, has some of the richest data in the world, ranging from youth study habits to perceptions of their own self-esteem and the social support they get from family and friends.

The immigrant effect was obvious in youth from a number of regions. More than 90 per cent of immigrants from Asian countries other than China (including India and the Middle East) as well as those from African nations went to university or college.

The study also looked at immigrants from English-speaking nations, as well as western and northern Europe.

About 70 per cent of them attend university or college, close to the rate for non-immigrants. The only group less likely to go than non-immigrants were those born anywhere else in the Americas, aside from the United States.

Finnie and Mueller ran the numbers in a different way, creating a mathematical model that cancelled out some factors that might explain the difference, including parents with higher education, high school marks and income levels. Even after cancelling those out, immigrants were still going to university in disproportionately high numbers.

Meanwhile, the immigrant effect gets watered down slightly after the first generation. How much it is diluted varies widely depending on the group, says Finnie.

Another interesting pattern was noted: those with a Canadian mother and an immigrant father were 19 percentage points more likely to go to university than non-immigrant youth. But if the youth had an immigrant mother and a non-immigrant father, the difference was 13 percentage points.

The immigrant thirst for education is often explained by suggesting that high aspirations are nurtured by parents who have high levels of education, says Sweetman. But it's not just the children of people with PhDs.

"There's a bunch of kids from Vietnam and Korea with parents who don't have an education," he says. "They have a culture of fostering education."

Ye says she was certainly not a study machine as a high school student. She recalls staying up to watch TV the night before a math exam and listed shopping with friends as a favourite pastime, along with the less orthodox hobby of repairing electronic gizmos.

Opportunities presented themselves and she took them. An unpaid high school co-op placement led to a summer job mapping computer chips. She won numerous scholarships.

"In grad school, you have to be persistent," she says. "I put a lot of pressure on myself."

There were cultural pressures as well. Both of Ye's sisters earned degrees in computer science.

Chinese parents want their children to have stable well-paying jobs, says Ye.

They believe in self-sufficiency and in reaping the rewards for investing effort and money in education. Children believe they have a duty to both support elderly parents and to meet their own potential, she says.

"It's the Asian culture."

There are Generation 1.5 implications for Canadian society as a whole, says Finnie.

The pattern in Canada appears to be different from that in Europe, where there are signs of unrest and alienation suggesting immigrants and their children have not integrated into their new societies.

The difference might have something to do with Canada's immigration "points" system, which favours people who are young, have more education, better language skills and relatives already living in Canada.

"We're interested in nation-building," says Sweetman. "They're interested in people doing menial labour."

Sweetman, a researcher at the Queen's School of Policy Studies, was involved in research that looked at differences in education levels among U.S. and Canadian immigrants and how that trickled down through three generations.

The results suggested that differences in immigration policy -- Canada has a greater emphasis on skilled workers -- accounted for lower education levels among U.S. immigrants compared to Canadian immigrants. The gap is expected to widen because of the "intergenerational transmission of education."

Finnie's study really crystallizes the success of Generation 1.5, says Sweetman.

"It's a two-sided message. The kids do well in the education system. And the education system does well by the kids."

© Copyright (c) The Ottawa Citizen


“Many immigrants come here for the kids. The kids understand that and they work for it," says Arthur Sweetnam and the reason is here. Confucianism is not a religion, despite the number of temples and the number of “prayers’ said at them. It is even more powerful, it is a socio-cultural custom, a way of life. At the very root of Confucian thought is filial responsibility. These young Chinese kids are not working so hard and so well just to get rich. They “owe” their parents and the currency in which the debt is repaid is not, wholly, financial – “esteem” and “success” matter.

But all of the work Finnie and Mueller did point to one fact: “our” kids, the children on non-immigrant families, are failing. But they are a HUGE majority so they cannot afford to fail we cannot afford that sort of failure. Six or seven percent of the population – which is what East and South Asians represent – cannot “save” the country.

Going back to Brian Lee Crowley’s thesis we can see that we have, indeed, “lost” something that was embedded in our culture, but Crowley doesn’t satisfactorily explain why native born Americans are, pretty much, in the same boat as native born Canadians. Not all the blame can be laid at Trudeau’s feet. It is true, I think, that Pearson and Trudeau created a whole category of useless, wasteful, publicly funded "pseudo-jobs" and these pseudo-jobs did go a long way towards corrupting ”the work ethic for which Canadians had, in earlier years, been famous.” But it would not have happened, not even to “save” Québec, if the same sort of thing had not, already, started in the USA. We have many stupid, wasteful, totally useless municipal, provincial and national government departments and agencies but our American friends have at least as many, likely (proportionately) more and that was not the 19th century expansion of government about which Leacok complained. It (the US and Canadian “models”) were post-war intrusions by the state into the everyday business of the nation but the instructions were not just tolerated: they were welcomed, even demanded.

The cause, however, is not overly important. The effect is that we are starting to rely upon immigrants to lead the country. Go to any major university campus; look around; look, especially, in the graduate and business schools. You will see that more than 15%, more, usually, than 25% of the faces are East and South Asian. Look at the business pages of any major daily – there are, regularly – pages of pictures of MBA graduates, newly minted chartered accountants and the like. East and South Asians make up six or seven percent of the population but they provide two or three or more times their “fair” share of scientists, physicians, engineers,  and accountants; they provide far, far below their “fair” share of truck drivers, labourers, retail sales people, nursery school teachers and so on. Look at any municipal works crew leaning on their shovels repairing the streets – East and Soth Asians make up six or seven percent of the population but you don’t see them taking six or seven percent of the low wage, semi-skilled jobs.

The problem is NOT with the East and South Asians. It is with the traditional, white/European stock, Canadians. The problem is cultural: “theirs” has adapted to the 21st century and it breeds success; “ours,” well, not so much.

Governments can do only so much harm. Finally "we" must either sink or save ourselves.

"We" includes 100% of the population, including the six or seven percent that is "doing its bit."
 
Cultural change does not come overnight, much of the damage was done by the "Progressive" movement starting in the early part of the last century. The mythology surrounding the "New Deal" and the role of government in the great Depression and the real role that expanded government played in winning WWII and WWIII (AKA the Cold War) also explains how big government managed to keep its luster for so long.

Literally generations of North Americans have lived and worked in this environment, and are quite comfortable with "entitlements", since expanding populations have concealed the Ponzi scheme nature of "entitlement" spending for generations as well.

Culture shift is coming, however, since the conditions are no longer sustainable (most US entitlement programs will become technically insolvent before 2020, and many cities and states already are facing a crisis of unfunded public service union pensions as well). Given these will trigger a real crisis, the big problem for Western culture will be fending off or dealing with "the man on the white horse"
 
Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Globe and Mail, is more on why our accomplishments are failing to match our potential:

http://www.theglobeandmail.com/report-on-business/commentary/an-economy-handcuffed-by-government/article1314811/
An economy handcuffed by government
In the first half of the 20th century, Canada was poised to become the richest country in the world

Neil Reynolds

Wednesday, Oct. 07, 2009

reynolds.globe@gmail.com

A century ago, Australia and Britain were significantly richer - as measured by per capita GDP - than Canada. On a scale that arbitrarily rates Canada at 100, Australia scored 138 in 1900 and Britain 154. Fifty years later, Canada had almost overtaken Australia (its 1950 rating: 102) and had surpassed Britain (1950 rating: 95).

In that 50-year period, Canada made progress in narrowing the Canada-U.S. wealth gap, too. The U.S. score fell from 141 in 1900 to 131 in 1950. And Canada made an astonishing advance compared with many other countries. Once almost equal to Canada in per capita wealth (rating in 1900: 95), Argentina fell dramatically in the first half of the century (rating in 1950: 68) and further still in the second half (2000 rating: 38).

In the first half of the 20th century, in other words, Canada was well on its way to becoming the richest country in the world, a point emphatically made by author and historian Joe Martin in his new book Relentless Change: A Casebook for the Study of Canadian Business History. Published by University of Toronto Press, Relentless Change is the first volume of its kind in this country - a textbook that simultaneously teaches business history and business strategy.

Part saga (from the Hudson's Bay Co. to the Alberta oil sands) and part political science (from limited government in the 19th century to all-encompassing welfare state), Prof. Martin weaves a historical tapestry from the threads of Canadian commercial achievement - not merely to illuminate the past, as he says, but to improve economic decision making in the future. Canada can't afford, he suggests, to repeat past mistakes.

Director of the Canadian Business History program at U of T's Rotman School of Management, Prof. Martin argues that it isn't enough to study government decision making in assessing a country's economic growth. It is essential as well to understand entrepreneurs and business executives - an understanding, he says, that Canadians woefully lack.

Prof. Martin argues that something went seriously wrong in the second half of the century that was supposed - in the famous phrase attributed to Liberal Prime Minister Wilfrid Laurier - to belong to Canada. Speaking in 1904, Laurier's actual words were bereft of nationalistic bravado: "Canada has been modest in its history," he said, "although its history is heroic in many ways ... The 19th century was the century of the United States. I think we can claim it is Canada that shall fill the 20th century."

Prof. Martin assesses Laurier's assumptions. Any appraisal of Canada's heroic history necessarily includes the legendary (yet oft forgotten) business leaders who built the country from scratch in an era of limited government. In this sense, Canada's business leaders "filled" the first half of the 20th century. Relative to any other country, Canada emerged from this period as a nation of enormous productivity and profound promise.

What went wrong? Prof. Martin uses the same per capita GDP scorecard, with Canada arbitrarily benchmarked at 100, to illuminate Canada's reversal of fortune in the past 25 years. In 1980, Australia scored 92; in 2005, it scored 97 - closing the gap with Canada. In 1980, Britain scored 89; in 2005, it scored 93 - closing the gap. In 1980, the United States scored 119; in 2005, it scored 123 - extending the gap.

"Given the relentless nature of change in capitalistic economies," Prof. Martin says, "there can never be room for complacency. Canada's more recent economic performance has not kept pace either with other countries or with our own record. It must be asked: What has happened in more recent times and why hasn't the Canadian economy performed better in the past 25 years?"

Prof. Martin is not didactic. He doesn't announce the answer. Rather, he provides clues. One of them is the enormous increase that took place in the size of government since the 1950s - and most specifically in the 1970s. In 1900, government commanded 10 per cent of Canadian GDP; by 1950, it commanded 25 per cent; by 1980, it commanded almost 40 per cent. Although the size of government increased gradually throughout the century, it was mostly in the 1970s that government abandoned business acumen for bureaucratic bulge.

The 1970s were Liberal Prime Minister Pierre Trudeau's decade - and it was during the '70s that government turned antagonistic to business. In the early years of the century, government relied on business for economic growth. By 1950, government had turned neutral. By 1970, it had turned negative and proceeded to demonstrate by example how businesses should be run. Government interference multiplied, ranging from the Canada Development Corp. (Canadair, de Havilland, Petro-Canada) to the Canadian Wheat Board and the CNR - some of the biggest corporations in the country. Government deficits inexorably followed, finally reaching the point at which interest on the national debt represented government's largest single budgetary expense.

Fortunately, the 1970s are behind us - yet we're all equity investors again, this time round in General Motors and Chrysler. Government could get it right one of these times, of course. More probably, we're merely repeating our mistakes.


While I doubt that Canada was ever “well on its way to becoming the richest country in the world,” it was not, prior to 1967, on its way to being an economic weakling, either. We, Canadians, have two overarching common, national characteristics: greed and envy.

We all want something for nothing, nothing strange about that but we have developed a wholly unfounded faith in the ability of governments to give it to us – presumably by robbing Peter to pay Paul, which is the only thing governments can do.

When we want something for nothing it is, generally, whatever our American neighbours have – with one exception: we do not envy their work ethic and risk taking nature. We don’t want that, and, once again, we look to government to “feed” our envious desires without requiring us to make any effort.

That culture of entitlement, which is Trudeau’s main legacy, is what is most “wrong” with Canada. 
 
As much as I enjoy beating up on Trudeau as much as the next guy it would appear that Canada is not unique in this regard.

From the Daily Mail:

Benefits 'wrecked the British work ethic,' new study claims

........The work ethic that inspired successive generations has ebbed away in the face of the welfare state.
Over the past decades each generation has seen more and more people milking the benefit system, which has sapped their will to work, the research from the Centre for Economic Performance said.......

......'It has long been recognised that generous unemployment benefits create moral hazard - workers are partly protected against the consequences of being unemployed, so they are less likely to search for jobs with the same intensity.' ......
The report in the journal CentrePiece said: 'A decline in the work ethic, induced by the expansion of the welfare state, is key to understanding European unemployment.'

Researchers looked at answers from countries across Europe to the World Values Survey, a regular poll carried out in more than 90 countries since 1980.
They examined numbers of people in different age groups who said they thought it was never justifiable to cheat to get benefits.
They found that people in their 40s - born in the 1960s - are 12 per cent more likely than those in their 70s - who were born in the 1930s, before the days of all-encompassing welfare states - to say benefit cheating is justifiable.
For those born in the 1970s, those who would never falsely claim benefits were 19 per cent fewer than those born in the 1930s.

For people born in the 1980s, the gap rose to 24 per cent. The report said the rise in numbers prepared to cheat the benefits system held good regardless of the political views or educational level of the individual.
'This decline in the work ethic could be one of the major factors explaining the evolution of unemployment since 1945,' Mr Michau said.
'When workers from the baby boom generation entered the labour market in the 1970s, they had a weaker work ethic than their parents and the moral hazard problem of unemployment benefits became much more severe.'
In Britain, unemployment grew in the 1970s and 1980s, a decade during which many of those without jobs chose to sign on for sickness benefits instead of less generous unemployment payouts.
At least half a million incapacity benefit claimants are thought to have no real disability.
Both Labour and Tories now plan to test those who claim they are unfit

.....

Yup Trudeau was a disaster for Canada but just as he had been in childhood so he was as an adult.  Far from being a unique Canadian phenome - he was a glib, charismatic, unoriginal follower capable of parroting effectively the line of the day to the believers.  He started with parroting the Pius line.  He finished with the LSE, or Harold Lasky line.  That was the common line that connected Trudeau, the Carter Democrats and the majority of the Socialist community in Europe and India.
 
Kirkhill said:
As much as I enjoy beating up on Trudeau as much as the next guy it would appear that Canada is not unique in this regard.

From the Daily Mail:

Yup Trudeau was a disaster for Canada but just as he had been in childhood so he was as an adult.  Far from being a unique Canadian phenome - he was a glib, charismatic, unoriginal follower capable of parroting effectively the line of the day to the believers.  He started with parroting the Pius line.  He finished with the LSE, or Harold Lasky line.  That was the common line that connected Trudeau, the Carter Democrats and the majority of the Socialist community in Europe and India.


Agreed, and see my earlier comment about ”Not all the blame can be laid at Trudeau’s feet ... it would not have happened, not even to “save” Québec, if the same sort of thing had not, already, started in the USA.”

And here, reproduced under the fair Dealing provisions (§29) of the Copyright Act from today’s National Post is a snapshot of Britain in 2009 that shows that the “rot” is not confined to North America:

http://network.nationalpost.com/np/blogs/fullcomment/archive/2009/10/08/barbara-kay-england-s-perished-cultural-sun.aspx
Barbara Kay: England's perished cultural sun

October 08, 2009

Barbara Kay

On our first trip to London some 35 years ago, my husband and I sought directions to a point of interest from two obvious City denizens, bowler-hatted gentlemen in three-piece suits, carrying briefcases and tightly rolled black brollies.

One of the otherwise impeccably turned out gents' suit collar was sticking up in back. As he limned an expedient trajectory to our goal, my husband casually reached out and turned his collar down to its default position. "Oh," gasped his companion with admiration and evident relief, "thank you. I've been wanting to do that all morning."

Lately I've been recalling that vignette with chagrin for having (later) laughed at this quintessentially British tic of excessive respect for others' personal space and privacy. I now realize that gentleman's diffidence was the last flourish of a precious social decorum that was already, unbeknownst to us, in sharp decline.

I'm glad we were privileged to go to England frequently when the going was good, and the English so ... English. It's been over a decade since our last trip. I daresay the theatre scene and other tourist attractions are as alluring as ever, but behind those increasingly Potemkinlike facades, as any close observer of British and world media is obliged to deduce, normative English culture has imploded.

Whether it is a function of socialism's too lengthy tenure, a surfeit of obeisance to feminist and multicultural pieties, secular hedonism run amok, a moral leadership vacuum, or a combination of the above, England, once a byword for bourgeois prudence, civic order, social tranquillity and cultural confidence, seems to have fallen into a societal death spiral.

Consider the following news items I have gleaned from a perusal of English media just in the last few weeks:

• Two brothers from a former mining village aged 10 and 11 tortured two other boys almost to death. These "feral children" had been raised by a drunken, violent father and a drug-addicted mother with no control over her seven sons born to three different fathers. They terrorized neighbours and ate from garbage pails. When told of her sons' arrest, the mother said: "It's nowt to do with me";

• A 36-year old Luton woman will soon give birth to her 14th child. She and her similarly unemployed partner take in £1,082 a month in benefits. All previous 13 children were taken into care before the age of two because of parental neglect. When asked why she keeps getting pregnant, she said: "I don't give a s----I just want the government to pay for them";

• As part of the National Literacy Strategy, English teachers have been given a training manual on grammar and punctuation. It offers advice such as: "Verbs are very important. They are the words that tell you what is happening in a sentence," and "In writing, we mark sentences by using a capital letter at the beginning, and a full stop ... at the end." I repeat, this is a manual for teachers.

• A recent survey cited in The Guardian noted that only 42% of those polled felt a caregiver would be wrong to persuade an elderly patient to revise a will in their favour, while 14% said they would try it themselves.

• Ten percent of the population in the UK has not worked since 1997. Twenty percent of British children grow up in households in which no adults work.

For heritage Canadians, England is still a special place. It is to England we all once looked for the gold standard in courtesy, fairness, reason, honour, courage, literacy, social civility and general human decency. But now, even as we enjoy tidily solved countryside English murders on Mystery and lovingly recreated Jane Austen novels on Masterpiece Theatre, one has the ominous impression of feeling warmed by the surviving rays of a perished cultural sun.

The deterioration of other great nations may be regarded with dispassion. But England's cultural collapse, if such it is, makes Canadians something like civilizational orphans. And it raises the disturbing question: If it can happen to mother, will it happen to us?


First: I am pretty sure it is already happening to us – no need to wait.

Second: at a GUESS:

• The first two horrible examples of parenting are ”native” English – from families who have been British for 1,000 years or more; but

• The apparent need for a primer for teachers is a result of politically correct attitudes towards the educational needs of immigrants wherein it is considered, nonsensically, that self esteem is more important than a solid grounding in the national language; and

• A significant portion of the chronically unemployed is made up of visible minorities. Those people are not lazy; they do not prefer welfare over work; but they do find it harder to find work – harder than is the case for white Anglos of similar qualifications.
 
E.R. Campbell said:
Agreed, and see my earlier comment about ”Not all the blame can be laid at Trudeau’s feet ... it would not have happened, not even to “save” Québec, if the same sort of thing had not, already, started in the USA.”

Missed that one.... a day late and a dollar short again.
 
The Good Grey Globe’s Jeffrey Simpson’s prescription for a renewed economy is higher taxes according to  this article, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Globe and Mail:

http://www.theglobeandmail.com/news/opinions/oh-for-another-slice-of-budgetary-prudence/article1317509/
Oh, for another slice of budgetary prudence
Why do the Conservatives refuse to save for a rainy day?

Jeffrey Simpson

Friday, Oct. 09, 2009

Prudence is a hard sell in politics, as it is in economics.

We know, as human beings, that bad things happen. So, if we can afford it, we take out insurance policies on our life, house, possessions. In jurisdictions without public auto insurance, the government makes us buy insurance in order to drive a car.

When humans act as citizens and voters, however, the notion of preparing for bad things flies out the window. It's so much easier to assume they won't happen, in which case prudence won't be necessary. We should live in today and not think too much about tomorrow.

Governments, imperfect reflections of ourselves, usually assume that bad things won't happen. They put together economic forecasts and produce budgets assuming that the unexpected and the bad won't happen.

There are exceptions. Former finance minister Paul Martin used to include a large slice of fiscal prudence in his budgets. The Conservatives, unhappily, have done away with that slice. They preferred to budget without prudence, and that remains their preference.

If you study Conservative projections, they are based on the assumption that bad things will not happen, that the economy will recover rather smartly, that growth will resume, that revenues will rise rapidly and that, by 2015, Canada will be out of deficit.

Their bet comes with long odds, given the huge uncertainties that face the world economy: America's staggering $9-trillion indebtedness, its very slow and hesitant economic recovery, the almost certain likelihood of higher interest rates, the inevitable decline of the U.S. dollar and the concomitant rise in the relative value of other currencies, including the Canadian dollar, plus the very real medium-term risk of inflation.

No one can predict with certainty which of these bad things will occur, but you'd have to be wearing rose-coloured glasses to assume that none will.

Think back over the past three decades or so – stagflation, high interest rates, slow growth, external shocks, a volatile dollar, recessions deep and mild. Nobody predicted these nasty developments, but they happened periodically. The best insurance has always been prudence.

Philosophically speaking, it's odd that Conservatives should be so lacking in it, since true conservatives believe in the likelihood that, humans being humans, errors will be made and the unexpected will happen, that only foolish socialists and liberals believe in the steady betterment of the human condition. Conservatives are supposed to be the skeptics, the doubters, the prudent.

But North American conservatism got away from those virtues many decades ago, first in the United States, when old-style conservatives were overtaken by the Goldwater- and Reagan-style conservatives, who believed in tax cuts as the answer to almost every social and economic problem.

This new conservatism seeped across the border into Canada, and, after many years, captured some of the commanding heights of the media and made its way into politics.

Curiously, those who espoused the newer conservatism disdained prudence in the form of saving as a cushion against bad days. For 20 years, Republicans ran the White House and often simultaneously the U.S. Congress. Not once in those 20 years did they balance the federal budget.

In Canada, Conservative provincial governments in Saskatchewan and Ontario, to name two, left big deficits for their successors. In Alberta, swimming in oil and natural-gas revenues, the Conservatives after Peter Lougheed (an old-style conservative) put next to nothing into the Heritage Fund, spent like drunken sailors (as conservatives often do, rhetoric notwithstanding), handed out tax rebates and left the province on its fiscal knees when commodity prices fell.

The Harper Conservatives, once elected, took the big surplus bequeathed them by the Liberals and used the surplus on tax cuts and some debt reduction, while they kept spending well above inflation. And they eliminated Paul Martin's slice of prudence.

So now, as Canada emerges from recession, can prudence make a comeback? Can we budget not for endless sunny days, but for the strong possibility that storms lie ahead, that we will need surpluses to pay for our aging population, that the bad and the unexpected will almost certainly strike?

The evidence, today and yesterday, is no.

The Liberals, under Jean Chrétien (with Paul Martin in Finance) were NOT saving for a rainy day; they were, purely and simply, overtaxing us, by hundreds of dollars each year, year after year, for every man woman and child, in order to have money for e.g. their illegal sponsorship programme.

Simpson’s hatred for everything Conservative has rotted his brain. Too high taxes are not fiscal prudence; they are a recipe for fiscal disaster. Big governments always fail their constituents; big governments can exist only when they can tax too much.
 
What makes these stories even more irritating to me is the Minister of Finance could have taken a quite different tack:

http://network.nationalpost.com/np/blogs/fpcomment/archive/2009/09/16/why-not-say-no.aspx

Why not say no?
Posted: September 16, 2009, 10:49 PM by NP Editor
Jim Flaherty, Mark Milke, budget

The Tories could have cut the deficit by $36-billion, by saying no to corporate bailouts and wasteful stimulus

By Mark Milke

W

hen governments wish to avoid frank admissions about bad budget numbers, including that produced by their own poor choices, one option is to try and highlight the “positive” aspect of such unpleasantness.

That was Finance Minister Jim Flaherty’s approach on the federal government’s $56-billion deficit — up $5-billion from the January budget forecast. In his recent Victoria speech where he announced the newest deep-in-hock figure, Flaherty asserted  that, “On the fiscal side, we are in the best situation of any country in the G7.” He also asked his audience to compare Canada to “our southern neighbour now forced to contemplate a future of cumulative deficits in the trillions.”

If patriotism is the last refuge of scoundrels, a comparison with a near-bankrupt neighbour to divert attention from one’s own red ink is the first refuge of a government unwilling to say “no” to most supplicants.

Fact is, a large chunk of this year’s $56-billion deficit is the result of choices made over the past year. Here’s how federal Conservatives could made the deficit smaller.

Conservatives could have said no to the multi-billion dollar bailout for the auto industry. In one year, the federal and Ontario governments have offered over $15-billion in cash for research, straight grants, insurance programs for auto suppliers and loans — which the Prime Minister himself noted would not all be repaid. Assume the federal government’s share of such lolly was $10-billion. Had Ottawa said no, the federal deficit would be “only” $46-billion.

But Ottawa has also been loath to disappoint others. A Finance minister with pruning shears might have  chopped $300 million this year in bio-fuel subsidies (from a planned $1.5 billion over nine years). Or he might refused $250 million to Air Canada. Another $1-billion for the forest industry (to subsidize that industry after the Americans subsidized theirs) could have been placed in the “no” file. Flaherty might also have cancelled the $206 million for a new southern Ontario regional development agency, and also chopped other regional subsidy programs by $650 million.

Add to such savings a $600-million take-away from VIA Rail (its $200-million plus annual operating subsidy plus the new capital grant of $407 million), and in total, those reductions would amount to $3-billion. That means this year’s forecast deficit would be $43-billion.

Where else might federal Tories have trimmed spending? On other corporate welfare beyond just the auto industry. The last year for which comprehensive statistics are available is 2006, when $6-billion annually was handed out to businesses. Suppose Prime Minister Harper made good on previous commitments to cut such subsidies. Assuming no annual increase in cash-for-clunky-companies beyond the auto sector bailouts noted above (an iffy assumption), pretend another $6-billion was subtracted from this year’s deficit. Now we’re down to $37-billion. 

Then dump some of the shovel-ready infrastructure spending outlined in the January budget. (Ottawa budgeted $12-billion over two years.) If only $2 billion was spent each year ($4-billion less annually), the 2009/10 budget deficit would be down to $33-billion.

Another place to cut federal spending could have been federal-provincial transfers. But Flaherty begged off that option in his Victoria speech. With respect to the example set by Paul Martin and Jean Chretien in the 1990s, Flaherty asserted that, “The previous Liberal government got rid of the deficit not by making smart reductions in government spending, but by slashing federal transfers to provincial governments.”

Back in the 1990s when Flaherty’s current boss was a Reform MP and later, head of the National Citizens Coalition, cutting transfers to the provinces would have appealed to Stephen Harper. After all, to make each level of government responsible for its own taxing and spending forces governments to be more accountable.  When transfers exist, each level can blame the other for not providing enough cash or for spending irresponsibly.

So suppose federal Conservatives gave provincial transfers a nip-and-tuck. Instead of sending $60.6 billion to provincial governments as the federal department of Finance projects on its own website, suppose Ottawa sent the provinces just what they provided back in the Dickensian dark days of 2006/07—$45.4-billion. That’s $15.2 billion less than planned in this budget year. All of a sudden, Ottawa’s deficit would be $18- billion.

Sure, an $18-billion deficit is still a lot of money, but it’s not $56-billion — only one-third, actually.

Deficits are not always avoidable, especially if revenues suddenly drop due to a recession. But this year’s federal deficit doesn’t have to be as large as the Conservatives claim; much of it is the result of their own choices.


And of course the moonster in the closet:



Terence Corcoran: Canada’s $1-trillion debt baby
Posted: September 11, 2009, 8:53 PM by NP Editor
Terence Corcoran, Jim Flaherty, deficits, debt
The Tory commitment to ‘eliminate’ Canada’s total net debt by 2021 now looks absurd

By Terence Corcoran

Debt is good, even for governments. But it depends on the kind of debt, what it’s used for and what the financial plan is for getting out of debt. Finance Minister Jim Flaherty’s latest revelations on the future of Ottawa’s annual deficits do not fill one with confidence that the federal government has a firm grip on the floodgates that control the level of debt in Canada, not all of which is going to be doing much good for the economy.

  By 2015, said Mr. Flaherty in his surprise fiscal update on Thursday, Ottawa will have pretty well tamed the beast. He said the annual deficit in 2015 will be only be about $5-billion, “a very modest number to deal with.”

The trouble with very modest numbers in the $5-billion range is that they tend to pop up without notice on a regular basis in government operations and then quickly, like gurgling slimy creatures in the movies, turn into gigantic long-term problems that are not so easy to handle. The next thing you know, you’re dealing with real money.

For instance, the federal deficit for this year, originally estimated at $50-billion, is now a modest 10% higher at $55-billion. Going forward, Mr. Flaherty laid out a slightly revised series of deficits that would still, under the best of circumstances, run the national debt up by $170-billion by 2015. That would bring Ottawa’s total net debt to $628-billion, a record in nominal dollars and about $19,000 per capita — compared with $608-billion or $20,000 per capital in 1997, the peak year for federal debt in current dollars. The numbers are different in constant deflated dollars, but not that different. The 1997 figure would be equivalent to $24,000 today. For taxpayers, having to carry a debt burden of $20,000 today isn’t a whole lot better than $24,000 in 1997.

That’s not progress, especially from a government that in 2006 boldly committed to “eliminating total government net debt.”

Ottawa isn’t the only player in the all-new national debt game. The provinces and local governments are also running up sizable annual deficits. Ontario is heading for $18-billion this year, and a succession of additional deficits in years to come. British Columbia, Alberta, Quebec, New Brunswick, Newfoundland — they’re all riding deficits that total about $31-billion this year alone. Assuming they follow the same fiscal track Ottawa is on, Canada’s provinces are likely to add close to $100-billion in total new net debt over the next five years.

These are rough numbers, to be sure, in that they don’t take in other elements of net debt calculation. But the trend is unmistakable. At the end of 2008, the net debt of all the provinces stood at $274-billion. If they collectively add $100-billion over the next five years, as seems more than possible, total provincial net debt will rise to about $375-billion by the end of 2015. Add that number to the projected federal net debt of $628-billion by 2015, and Canada is suddenly looking at $1-trillion in debt, or about $30,000 per man, woman and child.

The numbers don’t look quite so bad when measured against the size of the economy. At $1-trillion in 2015, Canada’s net debt to GDP ratio would be about 57.5%. That’s a long way from the 90% levels Canada hit in the late 1990s. But as the chart above shows, Canada’s track to lower debt has been drastically reversed and is now on a new upward curve. As Canadians know from experience, turning annual government deficits into balanced budgets and surpluses is a painful process that implies big cuts in government spending and higher tax levels. Somebody has to repay the debt and cover the interest costs.

Back in 2006, Mr. Flaherty touted his government’s commitment to “eliminate” Canada’s total net government debt. The target date was 2021. To get there technically required fulfilling two different objectives. First, the combined federal-provincial debt, now heading for $1-trillion, had to be down to about $680-billion by 2021. That objective now looks absurd and is wildly beyond reach.

The second key element of the debt-elimination plan was to build up the net value of the financial assets accumulating in the Canada and Quebec pension plans. By 2021, the two plans were expected to have increased their net asset values to $316-billion. The latest actuarial projects aren’t available yet, but it seems certain that those values will not be achieved given recent financial meltdowns and expectations of future market returns.

According to the current economic fashion, the big increase in federal and provincial debt is essential to stimulate the economy. Right or wrong, Canadians will still have to carry a $1-trillion national mortgage.
 
And big numbers become smaller.....

$30,000 / person
Amortised over 25 years at 4% results in a monthly payment of $141 and a total carrying cost over the lifetime of the loan of $12,500 or an average of about $40 a month.

 
Simpson reaches the right conclusion, but only by accident.

The deficit is simply the gap between revenues and expenses.  Sustainable revenue is obtained from taxes and fees.  Most taxes and fees are collected from economic transactions.  Borrowing, the other major source of revenue, is obviously unsustainable and can only be one of two things: a movement of future revenues (taxes and fees) into the present, or a deflation of the currency which makes the nominal deficit and debt proportionately smaller to the real economy and amounts to a taxation of assets and fixed incomes.  To expand direct taxation of assets (eg. one time "wealth" taxes to generate an infusion of cash) would be an interesting experiment, and probably would end in bloodshed.

Ultimately all revenues must be taxed or charged in fees, unless debt is repudiated.

In a sluggish economy, the total value of transactions falls, so revenues fall.  Concurrently - in any nation which provides social benefits - expenditures rise.  This is our current deficit situation.  The <b><u>hope</u></b> is that the economy will improve so that the net value of transactions increases and the draw down of social benefits decreases.  At some future point and without any change to nominal taxes or fees or base expenditures, the two lines may cross and the net budget will once again be in balance or surplus.  This summarizes the <b><u>strategy</u></b> of those who promise to balance the budget without any major new taxes or spending cuts.  Is <b><u>hope</u></b> a viable <b><u>strategy</u></b>?

The question is rhetorical; the answer is "no".

Simpson either misunderstands or has chosen to ignore the reasons for federal tax cuts.  Firstly, they are political gestures intended to win votes, exploited thus by Liberals and Conservatives.  But for fiscal conservatives in Canada, tax cuts are the only means to restrain federal spending growth.  Cutting revenues to match expenditures ties the hands of candidates and succeeding fiscal spendthrifts: they can't point to a surplus and promise it as largesse to voters; they have to reallocate expenditures or raise new revenues.

Governments do not often save for rainy days.  There are few Heritage Funds, and it is arguable that they are an effective repository for capital.  A surplus is overtaxation, <b><u>unless there exists an accumulated deficit (debt)</u></b>.  In the latter case, the reduction of debt principal represents the reckoning with past borrowing.  The preceding federal Liberal government managed the country's finances poorly; 1997-2007 was a "boom" decade during which we should have been paying for our past spending hand over fist.  While there is a debt to be paid there should be almost no new spending and minimal spending growth in established programs (ie. none more than necessary to account for price inflation and population growth).  This brings us to Simpson's second mistake.  The preceding Liberal government stubbornly insisted on spending surplus monies on things other than debt payment, and that additional spending was overtaxation.  The current Conservative government eliminated that overtaxation, and much of the increased Conservative spending people (such as Simpson) bark about was just the restoration of transfers to other levels of government that had been cut when falling interest rates and increasing economic activity closed the deficit gap enough to meet the Liberals' level of courage to implement spending cuts.

As I have repeatedly pointed out: <b><u>the federal Liberal party badly managed Canada's finances during the Trudeau era (overspending), and badly managed Canada's finances during the Chretien/Martin era (underpayment of debt).  Those who intend to vote Liberal need to find a reason other than the myth that Liberals are effective fiscal managers.</u></b>

Getting back to the current problem, the flaw is the assumption that economic activity will quickly rise to prior levels.  The '97-'07 decade was an exceptional, not usual, period.  <b><u>It is a grave and possibly unrecoverable error to calibrate spending to match peak revenues.</u></b>  Government spending in most jurisdictions grew to meet the flush revenues of that period; the state of California demonstrates perhaps the most egregious example in North America.

The Keynesian prescription is basically that the effects of a recession should be lessened by pulling the "hump" of future surplus into the "dip" of current deficit to smooth the path.  But it can only work for a short time.  Many people of all political persuasions agreed that consumer spending could not indefinitely be leveraged on credit cards and assets (eg. property values).  The day of reckoning arrived last year.  The reaction by governments, and particularly by progressives, amounted to this: "Yes, we think people should spend less...but not yet!".  So they embarked on "stimulus" programs.  But if people are determined to cut their personal debt, and are furthermore determined to manage their finances conservatively to mitigate what they believe is a coming fiscal storm due to profligate government spending, <b><u>the economic activity the spenders are counting on will not resume within the time span it must</u></b>.

<b><u>It is prudent to begin cutting government spending at all levels immediately.</u></b>
 
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