...when
it comes to economic policy ...Canada has
surprisingly often been the place where the future happens first.
And
it’s happening again. On Monday, Canadian voters swept the ruling
Conservatives out of power, delivering a stunning victory to the
center-left Liberals. And while there are many interesting things about
the Liberal platform,
what strikes me most is its clear rejection of the deficit-obsessed
austerity orthodoxy that has dominated political discourse across the
Western world. The Liberals ran on a frankly, openly Keynesian vision,
and won big.
...Which
brings us to the issue of deficits and public investment. Here’s what
the Liberal Party of Canada platform had to say on the subject:
“Interest rates are at historic lows, our current infrastructure is
aging rapidly, and our economy is stuck in neutral. Now is the time to
invest.”
Does
that sound reasonable? It should, because it is. We’re living in a
world awash with savings that the private sector doesn’t want to invest,
and is eager to lend to governments at very low interest rates. It’s
obviously a good idea to borrow at those low, low rates, putting those
excess savings, not to mention the workers unemployed due to weak
demand, to use building things that will improve our future.
...So will the Liberals put their platform into practice? They should. Interest rates
remain incredibly low: Canada can borrow for 10 years at only 1½
percent, and its 30-year inflation-protected bonds yield less than 1
percent. Furthermore, Canada is probably facing an extended period of
weak private demand, thanks to low oil prices and the likely deflation
of a housing bubble.
Let’s
hope, then, that Mr. Trudeau stays with the program. He has an
opportunity to show the world what truly responsible fiscal policy looks
like.
Lets hope these infrastructure investments don't lead to P3 scams like they have in BC.
ReplyDeleteWorkers NEED to be included in this plan. Remember when the north Vancouver Island highway was redone by the BC NDP in the 1990s? The BC NDP mandated a minimum worker wage so that everybody could share in the projects - it worked out well.
See this for the some new research:
http://www.vox.com/2015/1/8/7511281/labor-share-income
and this too:
http://economistsview.typepad.com/economistsview/2015/10/union-power-and-inequality.html
Deliberate deficits, adding more debt, to stimulate growth? Why do we need growth? Don't we need gdp shrinkage? We're reaching limits to earth's capacity.
ReplyDeleteGovernment may need to spend when the private sector won't but it has to spend wisely. Take Harper's 2009 stimulus budget. That was a Pinata budget. It was borrowed money doled out haphazardly which meant it had very limited stimulus effect.
ReplyDeleteIf Harper/Ignatieff been responsible, that money would have been targeted for investment in infrastructure. Managed properly, that's the one form of government spending that can yield major returns on investment in the long term.
How long do you think we would have an economy without essential infrastructure much of which today is old, falling apart and none of which was engineered to meet our changing environment? The costs of not investing in infrastructure greatly exceed the costs of renewing it.
Growth is one thing but stimulus spending can be the best way to offset economic shrinkage, even collapse, with all the social ills that it triggers foremost among them unemployment and poverty.
I'm with you Hugh on GDP shrinkage only I think that has to be very carefully managed. If you're interested in that, you could read Paul Craig Roberts, "The Failure of Laissez Faire Capitalism" for starters. Herman Daly's "Beyond Growth" is another good read.
Yes, I do remember fondly the BC NDP of the 90s just as I fondly recall the pre-Layton federal NDP. Both have gone all to hell since then.
ReplyDeleteAnyone eagerly looking forward to 75 year old bridges collapsing?
ReplyDeleteHow about sewer systems designed for 200,000 people being overwhelmed by population explosions?
Lots and lots of other examples.
It's patently foolish, if not completely asinine, not to upgrade infrastructure.
And, Dana, we're one, perhaps two decades in arrears already. Krugman's right. There's no better time than the present to tackle this problem before catchup is foreclosed.
ReplyDeleteBy infrastructure, do they mean highways and bridges designed for gas and diesel-powered vehicles? Surely that's not the way to go.
ReplyDeleteI think infrastructure upgrades should be for things like clean-electric rail, and buildings using passive solar heating, things like that.
As for population explosion, there isn't one. Due to low birth rates, population will probably shrink.
@ Hugh. It means the lot. Highways aren't the problem. It's what passes over them that has to be the focus. We have clean engine technology - electric or fuel cells, etc. - that will suffice. We do need to greatly expand rail transport. Sending transport trucks hauling trailers full of goods from Vancouver to Toronto is pointless. Send that cargo, point to point, via rail and then load it onto trucks for local delivery. We'll still need the highways, overpasses and bridges and they're in pretty rough shape but we need to change the way they're used.
ReplyDeleteTo achieve progress we'll need a vastly expanded rail network. High speed trains along the Windsor to Quebec City corridor. New freight tracks cross country. That sort of thing.
Then there's our much too wobbly electrical grid. That's beyond patching up. We need a new grid, a job best left to governments. Water systems, sewer systems - you name it. Those things need attention. Then, as sea levels rise this century, we'll need new infrastructure along all our coasts. Can't be avoided, can't be helped.
There's no significant population problem - in Canada. Around the world it's a different story. While there are various hot spots, Africa is the main one. The demographics tell the story. They have a huge segment that's nearing the "reproductive years." The West, by contrast, has an aging population so falling reproduction rates. The UN has loads of data on this.
The Liberals say they will cut GHG emissions, which means reducing use of fossil fuels. That will cause the economy to slow down.
ReplyDeleteReplacing fossil fuels with renewables is needed, but will result in much less overall energy available, thus a smaller overall economy.
That means less ability to sustain our already massive debt load, let alone take on even more debt.
But part of their platform is to Grow the Economy. This is presumably so they can add more debt. Kind of ponzi-economics.
It all doesn't seem to add up, IMO.
Hugh, reducing GHG emissions does not have to damage an economy. British Columbia's carbon tax had no such impact and that's true of other jurisdictions that have done the same thing. You're stuck on a dark fantasy hatched by the fossil fuelers.
ReplyDeleteNow you might argue that Alberta will suffer from the demise of the Tar Sands but look at reality. Bitumen has tied Alberta onto a boom and bust roller coaster. Sort of like the lottery winner who winds up broke a year later having squandered all his winnings. Sort of like an alcoholic at Mardi Gras. Norway followed Peter Lougheed's warning and they're rich. Alberta has steadfastly followed Ralph Klein's plan and they're broke. The American oil companies, however, have fared quite well but, like bitumen, their profits are for export straight back to the head office.
On what basis do you believe that a shift to alternative energy means less available energy? Again that's simply not the case and that's an issue that has been researched very thoroughly. Do you realize how much we pour into fossil fuel out of the public purse - the minimal royalties, grants and deferrals, the wholesale transfer of public resources (especially water) either free or at far below market value?
Sorry, Hugh, but you're way off base on these issues. Just do a little research online and you'll find the facts. Or take it from the largest public bank in the world, UBS
http://the-mound-of-sound.blogspot.ca/2014/08/worlds-largest-private-bank-ubs-says.html
BC's carbon tax hasn't affected the economy, but it hasn't reduced GHG emissions either. It doesn't work.
ReplyDeleteI just don't believe solar and wind power can replace energy from oil, coal and natural gas - just my opinion. I could be wrong.
cheers
Well, Hugh, you're in good company with a great many Canadians who have succumbed to "Harper thinking." You reach conclusions based on beliefs. Harper has been belief-driven since he arrived on the national scene. When facts contradicted his beliefs, he stuck with belief even to the point of vandalizing libraries, gagging scientists and, occasionally, shutting down entire research departments. Once you've headed down that road it's hard to turn around.
ReplyDeleteThere are plenty of sites where you can get factual information on BC's greenhouse gas emissions and the measured impacts of the carbon tax. Or, you can simply stick with whatever you choose to believe.
Did you even read the UBS report from last year? That's the world's largest private bank and it doesn't make rash recommendations to its investor clients. It can't afford to be belief-driven.
The link to Summary of GHG Emission 1990-2013 shows a drop in total BC emissions after 2008, when the carbon tax started, then rising to 2013:
ReplyDeletehttp://www2.gov.bc.ca/gov/content/environment/climate-change/reports-data/provincial-ghg-inventory-report-bc-s-pir
There are more cars on the road now than in 2008. People aren't driving less.