Please join us in Quebec City this May 28-30 for another round of PEF sessions at the Canadian Economics Association meetings. Here is the tentative PEF line-up for the meetings.

Friday, 09:00 - 10:30
PEF I: Was Financialization Rational for Capital?

Organizer: Robert Chernomas (U. of Manitoba)
-Fletcher Baragar, “Why Financialization, Why Now?”
-Robert Chernomas, “From Growth Stagnation to Financial Crisis: A
Missing Link in Mainstream Theory”
-Mara Fridell & Mark Hudson, “Financialization, Enabling Policy, and
Elite Policy Networks in the USA”
-John Loxley, “The Financialization Crisis and Sovereign Debt”

Friday, 11:00 - 12:30
PEF II: Canada’s Economic Security and the Great Recession: What Have
We Learned?

Organizer: Andrew Jackson (CLC)
-Andrew Jackson, “Employment Insurance ”
-Armine Yalnizyan, “Rethinking Economic Security”
-John Stapleton, “Social Assistance”
-Nick Falvo, “The Great Recession’s Impact on Homelessness”

Friday, 14:30 – 16:00
PEF III: Panel - Is There a Market Fundamentalist Message in the
Introductory Textbooks?

Organizers: Rod Hill (UNB) and Tony Myatt (UNB)
-Rod Hill (UNB) and Tony Myatt (UNB), “To Be Determined”
-Avi Cohen (York), “To Be Determined”
-Mel Cross (Dalhousie) and Brian MacLean (Laurentian), “To Be
Determined”
-Marc Lavoie (U. Ottawa) and Mario Seccareccia (U. Ottawa),
“Perspective on the Hill-Myatt Book from our Experience with the
Baumol/Blinder Project”
-Chris Ragan (McGill), “To Be Determined”

Friday, 16:30 – 18:00
PEF/URPE IV: Labour in a time of crisis, comparing experiences and
prospects in Canada and the US.

Organizer: Mathieu Dufour
-Michael Lynk (Faculty of Law, University of Western Ontario),
“Hydraulic Relationships: Labour Law and Economic Inequality”
-Armine Yalnyzian (CCPA), “Transformers: Recession’s Impacts on
Canada’s Labour Market”
-Mike Hillard (University of Maine), “Class Politics and American
Employer Exceptionalism: Why is the U.S. So Conservative?”
-Jeannette Wicks-Lim (Political Economy Research Institute), “U.S.
Policy Considerations to Guarantee Workers a Decent Standard of Living”

Friday, 18:30-20:30, PEF Social
Location TBD

Saturday, 0900-10:30
PEF/CSLS V: Perspectives on Happiness in Canada and the United States

Organizers: Andrew Sharpe (CSLS) and Chris Barrington-Leigh (UBC)
Chair: Ian Stewart (CSLS)
-Andrew Sharpe (CSLS), Ali Akbar Ghanghro (CSLS) and Anam Kidwai
(Institute for Competitiveness and Prosperity) “Explaining in Happiness
in Canada: New Results from the 2007-2008 Canadian Community Health
Survey”
-Chris Barrington-Leigh (University of British Columbia) “Canadian Life
Satisfaction Over Time”
-Richard Florida (University of Toronto), Charlotta Mellander
(University of Toronto) and Kevin Stolarick (University of Toronto)
“Should I Stay or Should I Go Now: The Effects of Community
Satisfaction on the Decision to Stay or Move”
Discussant: John Helliwell (University of British Columbia)

Saturday, 11:00 - 12:30
PEF VI: Integrating Climate and Industrial Policies

Organizer: Marc Lee, CCPA
Chair: Marc Lee, CCPA
-Marc Lee, CCPA, “So What is a Green Job Anyway?”
-Ken Carlaw, UBC-Okanagan, “Industrial Policy Lessons for Climate
Mitigation Strategies”
-Erin Weir, Steelworkers, “The Case for Carbon Tariffs”
-Brendan Haley, “From Staples Trap to Carbon Trap”

Saturday, 12:30 – 14:30
PEF AGM (lunch provided)

Saturday, 14:30 – 16:00
PEF VII: TITLE: “Canadian Public Finances and Monetary Policy: Sound
Finance or Functional Finance”

Organizer: Mario Seccareccia (University of Ottawa)
Chair: Marc Lavoie (University of Ottawa)
-Andrew Jackson (Canadian Labour Congress, Ottawa), “Reflections on
Canadian Fiscal and Monetary Policy during the Great Recession”
-Keith Newman (Communications, Energy and Paperworkers Union of Canada,
CEP, Ottawa) “Do Taxes and Bonds Pay for Government Expenditures?”
-Mario Seccareccia (University of Ottawa) “Is Functional Finance
‘Sound’ Long-Term Policy or Is There a Need for an ‘Exit Strategy’ to
Ensure Balanced Budgets?”

Saturday, 16:30 – 18:00
J.K. Galbraith Lecture, John Loxley

When emissions are reported for the US or Canada, there is an accounting convention that restricts the total to emissions released within the borders of that jurisdiction. This means that Canada’s exports of tar sands oil are counted only to the extent that fossil fuels are used in the extraction and processing, not the combustion of the final product in the US.

In BC, this came up in a recent approval of a new natural gas processing facility in the northeast, which will add more than 2 megatonnes per year to BC’s GHG inventory, but another 16 Mt per year downstream when it is eventually combusted (see this post). If we counted those emissions (and other emissions associated with the extraction phase) it would make BC’s total emissions inventory about one-third higher. To put that in perspective, BC’s much-lauded carbon tax is only estimated to reduce emissions by 3 Mt per year after 2020 relative to business-as-usual growth.

A new study by Davis and Caldeira takes a consumption or lifecycle approach to emissions to see how much has been “outsourced” to countries like China who make the stuff we consume:

Over a third of the carbon dioxide emissions linked to good and services consumed in many European countries actually occurred elsewhere, the researchers found. In Switzerland and several other small countries, outsourced emissions exceeded the amount of carbon dioxide emitted within national borders.

The United States is both a major importer and a major exporter of emissions embodied in trade. The net result is that the U.S. outsources about 11% of total consumption-based emissions, primarily to the developing world.

The full study has to be purchased through the publisher (here), but a good (free) summary of the main findings is here.

Canada, according to the study, is a small net exporter of GHG emissions. No data for Canada are presented, unfortunately, as Canada does not crack the top 10 net exporters list. But there is some work from Statistics Canada from a few years ago that sheds some light on this. A study by Joe St. Lawrence found that in 2002 Canada exported 264 Mt of Co2 equivalent emissions, an amount that is about half of total GHGs produced domestically. In the same year, about 105 Mt of GHGs were attributable to Canadian consumption as embodied in imported goods. This means net GHG exports were 151 Mt, a figure that is hardly “small” – enough to be number five on the Davis and Caldeira list (differing methodologies make these incomparable).

These studies are useful in highlighting the challenges of developing a new framework for GHG mitigation on the world stage. Exemplary countries that appear to be making progress on the emissions front, like many in Europe, may in fact be better at outsourcing the emissions associated with their consumption.

Another complexity is to look beyond just annual emissions. A deal-breaker issue in Copenhagen was the historical responsibility for GHG emissions, the fact that the advanced countries have been using the global commons “sink” to spur their economic growth for much longer than developing countries, who are now being asked to make similar reductions. I recommend a lecture Naomi Klein gave recently to a CCPA gala on the topic of climate debt, where she argues that emission reductions in rich countries are fundamentally a matter of justice from the perspective of poorer countries.

To give a sense of the magnitudes of historical emissions, the World Resources Institute has data on historical emissions (in this case, via the Guardian’s awesome data blog). The number one historical emitter, by far, is the US, with almost 30% of total emissions going back to 1900. Russia and China are next, each with just over 8% of the historical total. Canada ranks ninth, with responsibility for just over 2% of the total (a number consistent with is annual contribution).

If we were take the top 15 historical emitters (in descending order: US, Russia, China, Germany, UK, Japan, France, India, Canada, Ukraine, Poland, Italy, South Africa, Australia and Mexico), these countries account for 80% of total historical emissions. It makes for an interesting list because it is not exclusively rich countries. Part of this is due to population size: if we group the Western European countries together, they total more than 11% of the total.

It would be interesting to lump these two broad issues together: historical consumption-related emissions. For example, historical emissions show that China’s claim to be just another developing country that needs leeway to grow its emissions is a sham, but on the other hand the Davis and Caldeira study finds that China is also the number one net exporter of emissions by a large margin, with 22.5% of its annual emissions dedicated to exports (this number may be even higher now, as the study data is for 2004).

Finally, this all highlights the need to account for trade flows in accounting and in policy responses. Domestic policies to reduce emissions may be ostensibly successful, but may only encourage the outsourcing of emissions, with little change from a consumption perspective (or worse, larger emissions if Chinese power is from coal and production practices are more inefficient). Carbon tariffs, for example, would have to be considered alongside any carbon tax to level the playing field.

Like most economists, I’m big on efficiency. Even in my personal life I tend to group tasks together so that I save time, and I always feel a bit guilty if I retroactively realize I somehow failed to optimize my behaviour.

In my recent work on climate change, efficiency comes up in the context of GHG mitigation; for example, a carbon tax  comes up tops on the policy list for achieving emission reductions in the least costly manner possible. But with our governments doing a whole lot of nothing to reduce emissions, policy is going to be increasingly about adaptation, or how we respond to the physical impacts of locked-in warming. In this arena, the dominant concept (or perhaps, buzzword) is not efficiency but resilience, which generally means being robust to shocks and ensuring redundancies, which may actually be the opposite of efficiency.

BC needs to think about this a lot. A province where big weather systems move in from the Pacific to smash up against warm land and tall mountains is bound to have its share of calamity. Most of the settlements in the province are in river valleys or on the coast, making them susceptible to climate-change-related phenomena, from rapid onset events like landslides or windstorms to longer term changes like sea level rise. Indirect impacts also include the decimation of forest land by the mountain pine beetle, itself a consequence of climate change, and one that has upped the ante for massive fires. Every BC community will have a different set of risk factors but they share in common the potential of treacherous conditions that lead to flooding or hail storms, or that cut off electricity or transportation links.

So, how to plan for such potential outcomes? A lot of thinking has gone on about what sustainability means, however, and I generally take an ecological economics interpretation that sustainability is when inputs into production are harvested in a way that does not deprive future generations, and when wastes from production are within the sink functions of the planet. Resilience is harder to pin down.

Resilience is like “competitiveness” in economic policy discussions, a value or desirable attribute that is typically not anchored in anything measurable. The Climate Justice Project has been developing a framework for understanding community resilience, trying to find the right intersection between the top-down principles and components as understood in the academic literature, and the bottom-up efforts made by communities themselves, usually in the aftermath of a major shock.

First of all, resilience of what? By community are we talking about a municipality, or the broader region, which may include native reservations, the resource base and farms, and neighbouring towns to which people frequent for work, public services or family visits? Within municipalities, are we considering the various sub-populations that live there? Are we just talking about resilience for humans or also other creatures or biodiversity in general? Do we mean resilience of status quo structures and consumptions patterns? How do adaptation policies interact with mitigation policies? And so on.

I’m also particularly interested in the justice considerations of a resilience framework. It is reasonable to think that high income people will generally have greater capacity to weather storms than lower-income people, although the latter are also more accustomed to hardship, which may in fact increase their resilience. In New Orleans, many poor people lived in areas vulnerable to a dyke breech, whereas in BC it may be wealthier people with waterfront homes that are more at risk. Age is also a risk factor, with seniors more vulnerable to climate events like heat waves and less mobile should there be a need to evacuate.

Anyway, income or age per se may matter less than social networks, or how connected people are to others who can help in times of need. Which is a social form of redundancy. But even more mundane forms, resiliency demands redundant systems or networks: back-up power systems should the hydro lines go down; food supplies in emergencies but also greater self-reliance should supply chains fail; alternative sources of potable water. All of which requires planning, and public engagement processes to better understand different perspectives and how networks can be cultivated to better ensure reslience. So resilience policy is in many ways contrary the individualistic, hyper-efficient, just-in-time economic system we have developed.

[Thanks to a number of students and faculty at UBC who engaged these questions and issues in work for the Climate Justice Project and a recent student-led conference at UBC. This post is channeling many threads from that work.]

I have the following op-ed on page A19 of today’s Toronto Star. It reiterates points made before on this blog.

The only substantive difference is that I had previously low-balled the annual profits of Ontario’s Crown corporations at $4 billion. Today’s op-ed assumes $4.3 billion, the amount anticipated for the current fiscal year. That assumption probably still understates the value of Crown corporations, which are projected to generate $4.8 billion by 2011-12.

Even ignoring likely future profit growth, the proposal to privatize a minority stake in provincial-government enterprises looks like a ripoff for the people of Ontario.

March 10, 2010

Erin Weir

PATRICK CORRIGAN/TORONTO STAR

This week’s provincial throne speech indicated that Queen’s Park has “initiated a review of its business enterprises.”

The Ontario government is reportedly considering combining these enterprises into a “super corporation” and selling a minority stake to private investors. This proposal is politically clever, but would be a financial blunder for the province.

The super corporation would apparently include Ontario Lottery and Gaming, the Liquor Control Board of Ontario, Hydro One and Ontario Power Generation. The main objections to privatizing these Crown corporations are that they provide a steady stream of revenue and control socially important assets.

The governing Liberals have tried to avoid these objections by musing about selling only a minority stake. The province would retain control of the assets and a majority of the revenue that they generate.

An important concern is that such partial privatization could be a slippery slope toward a more complete sell-off. Even if one believes that the Liberal government would never sell more than half of the super corporation’s shares, establishing this entity and issuing shares would make it easy for a possible future Conservative government to finish the job.

In at least temporarily avoiding the worst pitfalls of privatization, the Liberals would also miss the supposed upside. Privatization is usually intended to replace public-sector management with allegedly superior private-sector management free from political constraints. Selling a minority stake would not change management.

The super corporation would mainly just convert a portion of future revenues from Crown corporations into upfront cash. Essentially, the government is considering a reverse mortgage: it would get a large dollop of one-time money and retain control of the house, but lose some ownership.

The throne speech pledged that the government “will use the proceeds to better support Ontarians’ highest priorities.” Obviously, all provincial funds should be used to support Ontarians’ priorities. The real question is whether the proceeds of selling shares in government enterprises would exceed the proceeds of keeping all the revenues from these enterprises.

The Star has reported a value between $50 billion and $60 billion for the super corporation. Selling one-third of the shares based on a $50 billion valuation would raise $16.7 billion (minus hefty Bay Street fees). With long-term provincial bonds paying just under 5 per cent interest, reducing current borrowing by the full $16.7 billion would lower future debt-servicing costs by $800 million per year.

On the other hand, Ontario’s Crown corporations are expected to generate profits of $4.3 billion this fiscal year. Giving up one-third would reduce provincial revenues by more than $1.4 billion. If the super corporation were subject to provincial corporate tax, the scheduled 10 per cent rate would recoup $140 million. Still, annual provincial revenues would be $1.3 billion lower.

The government would lose more than $3 of revenue for every $2 saved on debt servicing. In total, Ontario taxpayers would come out half a billion dollars poorer every year.

Just to break even, the provincial government would need to value its super corporation at more than $70 billion. But private investors would not accept such a valuation.

Those who want a steady return of nearly 5 per cent can simply buy long-term provincial bonds. Prospective investors in government enterprises would clearly expect more. If investors could not increase profits by taking over management, the only way to achieve a higher return would be to buy shares based on a lower initial valuation.

Furthermore, the stock market generally discounts conglomerates relative to pure plays. Many investors might be interested in sectors like liquor retailing or electricity transmission. Far fewer would be interested in an unwieldy hodgepodge of different enterprises concentrated in a single province.

The government would reportedly limit the number of super-corporation shares held by any single investor and by all foreign investors. Such restrictions may serve legitimate public-policy goals, but would further reduce the field of potential buyers and hence the likely sale price.

Under the Constitution, one level of government cannot tax another. Provincial Crown corporations pay no federal corporate tax. If the super corporation were subject to federal tax, its profits would be less than those of existing provincial enterprises.

To justify the risks of even partial privatization, the government should be expected to demonstrate significant rewards. In fact, the province would lose more than it would gain by selling shares in a super corporation. The people of Ontario would be better served by maintaining public ownership of our Crown corporations.

Erin Weir is an economist with the United Steelworkers union.

MEDIA ADVISORY

Wednesday, March 10, 2010

Thousands of Canadians to Participate in Canada’s First Bottled Water Free Day on March 11th

OTTAWA – On Thursday March 11, Canadians from coast to coast will be participating in Canada’s first Bottled Water Free Day.

Highlights of Bottled Water Free Day include:

• Announcements by Ryerson University regarding the sale of bottled water
• Events on more than 60 college and university campuses
• The release of data on spending by the CBC on bottled water obtained through an Access to Information Request

More than 70 organisations, institutions and municipalities including the Sierra Club of Canada, Canadian Labour Congress, City of Sudbury, and Durham Catholic District School Board have endorsed Bottled Water Free Day to date.

Bottled Water Free Day is organised by the Canadian Federation of Students, Sierra Youth Coalition and the Polaris Institute.

read more

Yesterday afternoon, I caught the subway down to Queen’s Park to find out whether the throne speech would shed any light on the provincial government’s privatization plans. As it turned out, the speech included only a couple of lines on Crown corporations.

But I ran into blogger extraordinaire Warren Kinsella at the legislature and note that he has reprimanded Tim Hudak for heckling the Lieutenant Governor. I did not have a good view of Hudak, but did hear some noise from Conservative benches. The most audible chuckles were in response to the following bit:

Your government is also cutting corporate income taxes and eliminating the capital tax this year.

And in lockstep with the federal government, Ontario is introducing a harmonized sales tax.

Independent economists say these changes will create nearly 600,000 more Ontario jobs . . .

As I pointed out exactly a month ago in The Toronto Star, this claim is indeed laughable (see below). Of course, Kinsella is right that it is inappropriate to make noise while the Lieutenant Governor reads the throne speech. However, I suggest that it is also inappropriate to stick a Liberal talking point in the throne speech for the Lieutenant Governor to read.

At least HST has created one job (Feb. 9, 2010, page A18)

Premier Dalton McGuinty says, “Economists have told us that our package of tax reforms will lead to 600,000 more jobs.” He appears to be using a projection from the University of Calgary’s Jack Mintz. But is this projection reasonable?

Mintz claims that business tax cuts will greatly increase investment. He then assumes a fixed ratio of labour to capital, so that employment income automatically increases by the same proportion as investment. Finally, he assumes fixed wage rates, so that all growth in employment income must represent additional jobs.

It is nice that the tax package has created at least one job: using dubious assumptions to manufacture inflated employment projections.

Erin Weir, Economist, United Steelworkers, Toronto

I’ve been remiss in not posting information about and links to the federal budget analysis that we did at CUPE, as Paul Tulloch had urged on this blog.  

In addition to the press release we issued, there’s an overview and summary that I prepared on budget day, and a dozen really good detailed issue sheets that different CUPE researchers prepared about the budget and what it does –and doesn’t–do for aboriginal peoples, climate change, early learning and child care, employment insurance, health care, municipal infrastructure, non-profit community and social services, pensions, post-secondary education, privatization, water and women.

Later on, I’d like to comment on the measures in the federal budget taken to tighten up on the stock option tax deduction that I had written about the day before the budget.   I believe their claims of tax savings from this measure are far too high and will come out on the corporate tax side, rather than the PIT side in any case.

And for some entertainment, here is the link to a video, also critically acclaimed on YouTube “The scourge of fair taxes”, that CUPE had done after the 2008 Budget.   Still very relevant and funny after all these years.

I was pleasantly surprised to see a report published yesterday by Don Drummond and Francis Fong at the TD Bank on the Changing Canadian Workplace.  

It provides a short but decent summary of some different issues affecting labour: macro trends, educational requirements, changing composition, women, immigrants, aboriginal Canadians, older workers, widening income gaps, income security, etc.  

These are a lot of the issues we are familiar with.  I’ve only given it a quick skim, but it is refreshing to see someone else deal with these issues in what initially appears to be a candid way.

Don Drummond will be giving the Sefton memorial lecture on labour issues later this month.   It appears that, as well as International Women’s Day, was the impetus for this report.

Today’s day-after-International-Women’s-Day story in the New York Times by Nancy Folbre links to four indices of gender equity.

http://economix.blogs.nytimes.com/2010/03/08/the-worlds-best-countries-for-women/

How is Canada doing?

Canada ranks 4th in the Human Development Index (we were number one for eight years) as well as the UNDP Gender Development Index, behind Norway, Australia and Iceland. Norway has been ranked the best country for human development and gender equality for seven years now.

The UNDP’s Gender Empowerment Index puts us at 10th place (behind Norway, Sweden, Finland, Denmark, Iceland, the Netherlands, Belgium, Australia and Germany)

The World Economic Forum Gender Gap Index places us in 18th place, where we’ve been since 2007.

Social Watch’s Gender Equity Index uses a different system, to measure out of 100. Canada is 75% this year, where this measure has been since they started 2007, compared to a global average of 34.5%. They don’t do rankings. Globally, the average value dropped between 2008 and 2009, pointing to the impact of the crisis on women’s prospects, particularly in the world’s poorest countries.

Both the World Economic Forum and Social Watch are more focused on what is happening in the global south.

While this ranking shows stasis for Canada in the past few years, any improvements women have seen in the past decade are based on their own steam – getting more post-secondary education, working more, buying more homes, getting deeper into personal debt. For years federal budgets have focused on tax cuts and, more recently, stimulus that primarily benefits markets and men. Women, on the other hand, are the primary beneficiaries of improved access to public transit, child care, health care, affordable housing, affordable education, etc. etc. all supports that require more, not less, public sector involvement.

At roughly 13% of GDP, the federal share of the economy today stands at levels of the late 1950s, before we had Medicare, unemployment insurance, seniors’ income supports and a vast network of universities and colleges, and roughly 2 percentage points lower than the post-war average. The government plan is to pull the size of government further back.

At the same time it’s also focused on a crime-and-punishment agenda and a Defence plan that commits the public purse to spending billions more for policing and emprisoning people at home and fighting wars instead of helping develop nations abroad.

You can only make an economically strong country a great country for people to live in with a public sector engaged in supporting the public. A big public sector doesn’t necessary mean we’ll get the supports people need to reduce violence and have opportunities to learn, grow and participate.

Make a country a safe place for women to live and develop their potential, and it’s great for everyone. That’s of course why we went to Afghanistan…right? We should be aiming to make Canada the best country in the world for women (and their loved ones) to live.

Last weekend, I spoke at a community event celebrating International Women’s Day in Vancouver. It got me thinking about the status of women in the Canadian economy, reflecting both on the successes over the last half century and on the areas where work is still needed to achieve gender equality.

As a young woman in Canada, I have not felt discriminated against. Throughout my university career, my gender didn’t seem to matter and professors encouraged me to pursue a PhD and the life of an academic as much as any of my male fellow students. Growing up in Bulgaria was a different story - my own mother stopped me from going to a physics-based high school program at home because she felt that physics in not for women (those were her words). As an electrical engineer herself, she obviously had experienced discrimination and wanted to prevent me from going down that same road.

In Canada, however, I didn’t get any of that. Maybe it’s because I live in Vancouver, but what I hear Canadians tell their girls is that they can grow up to become anything they aspire to — rocket scientists, surgeons or presidents. Many of the young women I meet feel similarly - they feel that they are free to make choices and say they are as much in control of their career paths as their male friends.

Yet, when we look at the numbers, women are not growing up to be rocket scientists, surgeons or presidents. Nurses, teachers and social workers is more like it. Women are woefully underrepresented in “non-traditional” occupations such as high-level management and natural sciences. Even in the public sector, where women make up the majority of the workforce, they’re less likely to hold senior management jobs than men.

Yes, there are some women in leadership positions in areas that were previously closed to our gender in politics, business and academia. But they are few and far between.

So, if young women feel that gender is irrelevant for economic success, then why are women’s average annual earnings for full-time, full-year work in 2007 only 71 .4% of men’s? Why are average hourly wages so different: in January 2010, women got paid on average $20.59 per hour, compared to men’s $24.49? Why do women continue to be overrepresented in low-wage jobs? Over 60% of minimum wage workers are women and the proportion of workers earning under $10 per hour is similar.

It would seem that something happens somewhere along the line between school, when the sky’s the limit, and the demands of real life which pushes women into traditional sectors. The older I get, the more convinced I become that this something is children. Or rather, that it’s the outdated family policy that we have in Canada (and the US) that forces women to choose between motherhood and career or economic success.

Recent studies from the US show that in corporate America, childless women’s earnings are on par with men’s, and the earning discrepancies appear when women start having children. Research by Statistics Canada shows that having children is associated with an earnings loss that persists throughout a woman’s working career. At any given age, women with one child earned about 9% on average than childless women, while those with two children earner 12% less, and those with three or more children earned 20% less. The earning gap was larger for women with higher education than for those who only had high school diplomas. Curiously, this parental penalty does not seem to apply to men - men with children earn more on average than childless men.

The more I dig into the research, the more it seems that women with children earn less because they end up taking years away from work. And the reason that they are often forced to do so is that women remain the primary caregivers for children and we lack the social supports to allow women to work and care at the same time. Changing this would require a concerted effort by governments and the private sector.

What governments have control over is Canada’s family policy, and it is sorely in need of change to catch up to social realities of the 21st century - many women with children work, whether by choice or by necessity, and we need to put in place adequate programs to support these women and their families.

Providing accessible childcare that families can afford is an obvious one. Improving parental leave provisions is another way to improve many women’s lives. Statistics Canada quotes a recent survey showing that 40% of new parents could not take the entire parental leave because their family’s financial situation required them to go back to work. Increasing benefit amounts to reflect costs of living would be a great start.

Employers will also have to adapt, and we’ve already started to see some of that. More and more employers allow flexible working hours, opportunities to work from home and an increased availability of part time work. These are all changes that make it possible for women to care for children without having to completely withdraw from the workforce for years at a time.

Some companies are even in the business of raising awareness that women have not achieved nearly equal representation on the top of organizations both in the private sector and in government. McKinsey & Company is probably the largest and best-known professional services firm that is calling attention to the shortage of women in leadership positions in America’s businesses. Their reports, Women Matter and Women Matter 2, demonstrate some important relationships between the presence of women in corporate leadership roles and the financial performance of organizations and explore why that may be the case. This is a good start, but more work needs to be done.

The need to support women to work and to care would only become more pressing as the population ages and we start to experience labour force shortages. We need the women to fully participate in the labour market, as workers and as decision-makers. Changing family policy and making workplaces more flexible is the way to do it.

So go ahead and continue telling the girls that the sky’s the limit, but let’s also make sure that it’s really true.

Happy international women’s day to all.

This morning, Statistics Canada released Corporations Returns Act data for 2007:

Foreign acquisitions of Canadian-controlled firms, particularly in manufacturing and oil and gas, drove a 10.6% increase in Canadian assets under foreign control in 2007. Canadian assets under Canadian control rose 9.9%, led by the depository credit intermediation industry.

As a result of these movements, foreign-controlled firms accounted for 21.3% of corporate assets in 2007, up slightly from 21.1% the year before.

Foreign investors took over substantial chunks of manufacturing and the oil patch. On the other hand, the banks (which are Canadian-controlled) greatly increased their assets prior to the financial crisis. Therefore, the overall proportion of corporate assets under foreign control did not change much.

Given the controversy around certain foreign-controlled mining companies, I was interested in the data on that industry. Unfortunately, Statistics Canada deems the mining data for 2007 “too unreliable to be published.”

However, the major foreign takeovers in mining occurred during 2006. The Corporations Returns Act publication for 2006 had indicated that foreign-controlled mining assets jumped from $10 billion in 2005 to $39 billion in 2006. In other words, foreign control of Canadian mining rose from 12% to 40%.

Today’s publication for 2007 does include revised figures for 2006, which reveal an even more dramatic story. In fact, foreign-controlled mining assets jumped from $10 billion in 2005 to $54 billion in 2006. So, foreign control of Canadian mining actually rose from 12% to 48%.

My post on this past Monday’s Gross Domestic Product (GDP) release emphasized the disconnect between profits and investment in the corporate sector. As Andrew commented on that post, the public sector’s contribution to the recovery is also noteworthy.

That point seems especially relevant in the wake of a federal budget devoted to continuing previously announced stimulus. The right-wing critique from outside the Conservative Party seemed to be that the budget should have stopped or reduced announced fiscal stimulus because Canada’s economy is already recovering thanks to the magic of the market and/or monetary policy.

Output has indeed recovered somewhat since bottoming out in the second quarter of 2009. How much of that recovery was driven by fiscal stimulus? There are a couple of methodological challenges in breaking down GDP to address this question.

First, nationwide output is obviously difficult to count. Even in the unadjusted, current-dollar figures, Statistics Canada acknowledges a “statistical discrepancy” between total GDP and the sum of its components.

Second, the official figures are seasonally-adjusted at annual rates in chained 2002 dollars. The separate seasonal adjustment of total GDP and of each GDP component creates a further difference (in any given quarter) between the total and the sum of components.

Such discrepancies of a few billion dollars are tiny in the context of a $1.3-trillion economy. However, they loom larger when comparing particular quarters. Total GDP grew by $18.8 billion between the second and fourth quarters, but adding up the components suggests growth of only $13.4 billion (unless my arithmetic is wrong.)

Canada’s GDP (seasonally-adjusted in billions of 2002 dollars)

 Q2

 Q4

 Increase

 Total GDP 

1,278.2 

1,297.0

 18.8

 Consumer Spending

 807.6

 822.0

 14.4 

 Gov. Purchases 

 269.7 

 277.7

 8.0 

 Gov. Investment 

 49.1 

 53.9 

 4.8 

 Housing Construction 

 70.8 

 77.3 

 6.5 

 Other Biz. Investment 

 150.9 

 153.1 

 2.2 

 Exports 

 403.2 

 429.9 

 26.7 

 Minus Imports 

(476.2) 

(525.4) 

(49.2) 

 Sum of Components 

1,275.1 

1,288.5 

 13.4 

 
Economic growth has been net of a substantial deterioration in Canada’s trade balance. As components of real GDP, imports have recovered much faster than exports. (Canada’s trade deficit has narrowed slightly in current dollars due to higher prices for commodity exports, but the volume of exports has expanded far less than the volume of imports.)

Given the exchange rate’s sharp rise since the second quarter, it is relatively cheaper for Canadians to buy imports and relatively more expensive for the world to buy Canadian exports. I would count the consequent $22.5-billion drag on GDP as a major strike against Canadian monetary policy. In any case, the recovery to date reflects roughly $40 billion of additional domestic spending.

Consumer expenditures accounted for more than one-third of this increase. Monetary policy has helped make consumer credit available again while fiscal policy has promoted spending and put more money in consumers’ pockets (e.g. the home-renovation tax credit and extended Employment Insurance). However, it is difficult to conclude that either monetary or fiscal policy is mainly responsible for resurgent consumption.

Government expenditures on goods, services and investment (excluding cash transfers) accounted for about one-third of the increase in domestic spending. The public sector has punched far above its weight. While direct government spending amounted to just under 40% of consumer spending in the second quarter, it has provided nearly 90% as much growth since then ($12.8 billion versus $14.4 billion).

Public infrastructure has played an especially important role. Government investment amounted to below 4% of GDP in the second quarter, but has propelled at least 12% of subsequent domestic growth. Expanded government purchases and investments are entirely attributable to fiscal stimulus.

Business investment accounted for less than one-third of the domestic-spending increase. Most additional business investment has gone into residential structures. Corporate Canada is actually investing slightly less in non-residential structures and equipment. The small remaining increase in business investment reflects smaller withdrawals from inventories.

I am inclined to give low interest rates full credit for the current housing boom. The rest of the measured increase in business investment may just reflect inventories running low. However, even if one attributed the entire increase in business investment to low interest rates, monetary policy still contributed appreciably less than fiscal policy to Canada’s recovery ($8.7 billion versus $12.8 billion).

Of course, the internationally-coordinated response of monetary policy was critical in stopping the economic free fall that began in late 2008. Indeed, I advocated that the Bank of Canada cut its target interest rate to zero months before it did so.

But despite the importance of monetary policy, it is ridiculous to argue that fiscal policy should stand down because monetary policy is on the job. They are complements rather than substitutes and fiscal policy has driven significantly more of Canada’s recovery to date.

The front page of today’s Toronto Star reports, “The Ontario government is looking at creating a publicly held $60 billion ‘super corporation’ of assets such as the Liquor Control Board of Ontario and Hydro One and then selling a minority share to private investors.” It would also include the province’s other major Crown corporations: Ontario Power Generation and Ontario Lottery and Gaming.

More than a month ago, my pre-budget testimony at Queen’s Park noted, “Another proposal has been to raise money by selling provincial assets. . . . just to break even on privatizing Crown corporations, the Government of Ontario would need to sell them for $72 billion.”

Apparently, I was correct to suggest that the McGuinty government was contemplating selling all of Ontario’s major public enterprises as a package. And my estimate of what that package might be worth was in the right ballpark.

However, the government is proposing to sell only a minority stake, while retaining control of the assets and most of the profits. Although it is obviously trying to avoid the usual objections to privatization, many people will legitimately worry that this scheme is a slippery slope toward a more complete sell-off. Even if one believes that Liberals would never sell more than half of the “super corporation” shares, setting up the entity and issuing shares would make it easy for a potential future Conservative government to finish the job.

In (temporarily) avoiding the worst pitfalls of privatization, the government’s proposal also misses the supposed benefit of privatization: replacing public-sector management with allegedly superior private-sector management free from political influence. Rather than changing how Crown enterprises are managed, the “super corporation” would mostly be a way to convert a portion of future revenues from Crown enterprises into up-front cash.

Essentially, the Ontario government is considering a reverse mortgage from Bay Street: the government gets cash today and retains control of its house, but loses some of the ownership. Would that be a good financial deal for the provincial treasury?

As I noted in my pre-budget testimony, if the Ontario government writes long-term bonds at 5% interest and levies a 10% corporate tax on privatized profits, the $4 billion of annual Crown-corporation profits are worth $72 billion of up-front cash. However, The Star reports that the super corporation “could be worth between $50 billion and $60 billion.”

If the government sold one-third of the shares based on a $50-billion valuation, it would shrink the current year’s deficit by $16.7 billion. That would reduce future debt-servicing costs by $0.8 billion per year. But giving up one-third of Crown corporation profits would reduce provincial revenues by $1.2 billion per year. On balance, Ontario taxpayers would come out nearly half a billion dollars poorer.

So, partially privatizing public enterprises seems politically clever, but financially stupid. The Star quotes a Liberal insider almost admitting as much: “It would satisfy the left because you would still have unionized workers at these publicly owned entities and it would satisfy the right, which always wants to privatize things . . . The only downside is if the market doesn’t react positively to it.” Indeed, there are a couple of reasons why the market might even value the “super corporation” below $50 billion.

First, the stock market generally discounts conglomerates relative to pure plays. On New Year’s Eve, I appeared on the Business News Network regarding privatization (watch video). My co-panellist was John Sadler, an advocate of privatization. He concluded the discussion by rejecting the idea of amalgamating Ontario Crown corporations and then selling shares in the conglomerate because the market would apply a steep discount.

Second, The Star reports, “There would be foreign ownership limits, no single shareholder would be able to own more than 5 per cent.” While such restrictions may serve legitimate public-policy goals, they would also limit the field of potential buyers and hence the likely sale price.

A final question is whether the super corporation would have to pay federal corporate income tax. Doing so would reduce the profits it could remit to both the provincial government and private investors (and hence the amount that they would pay for shares.) However, it is possible that retaining control and majority ownership would allow the Ontario government to classify the new entity as a provincial Crown corporation exempt from federal tax.

Analysis of the 2010 Federal Budget by David MacDonald, coordinator of the CCPA’s Alternative Federal Budget:

If there was any policy recalibration due to prorogation, it was on their photocopier as 94% of this budget’s spending has already been announced.  The problem when you photocopy your work is that you don’t learn anything from the process.  That is certainly true of the Harper government.  The Conservative reforms to EI were meant to help more of the jobless, yet half of all unemployed Canadians still can’t access EI.  The concern last year was that EI recipients would exhaust their benefits before they got another job and that is exactly what is happening.  Last year’s plan isn’t working to address this year’s challenges.

It also appears that the Harper government isn’t seeing what most Canadians are seeing which is plenty of advertising and little actual building of infrastructure.  Instead of cutting red tape to get infrastructure programs moving, the government is cutting regulations on uranium mines.

Government spending is capped more generally with strategic reviews forcing departments to cut 5% of their programs when the review gets to them.  The glaring omission to these caps is the defense department that continues to grow at its pre-established rate until 2012 when the growth rate slows slightly.  Although there is plenty of talk about Canada’s positive role in Haiti and Afghanistan, international development spending that makes that possible has been capped making these types of interventions much harder in the future.

What is little advertised in this budget is that much of the deficits going forward are being caused by the continuing corporate tax cuts worth on average $4 billion a year over the next 3 years.  It is also worthwhile noting that while building stimulus infrastructure ends next year, the tax cut measures introduced as stimulus will continue to erode revenues indefinitely.

The 6% of newly announced programs are more weighted with fluff than actual new spending.  Similar to last year’s stimulus budget, there is no coherent vision for the future.  There is a smattering of small new spending efforts with a lot of padding for government programs that are paid for out of existing funds.  Seniors are given their own holiday, but no action on pensions is taken.  Some small new amounts are spent on university research, but nothing is done to address crippling student debt.

Despite its title, this isn’t a leadership budget, it is an acceleration of Harper’s Americanization of Canada with “race to bottom” corporate tax rates, and an ever expanding military.  The jobless are left to fend for themselves and national planning for the future beyond balanced books is completely off the table.  While the military is exempt from spending caps, addressing foreign policy goals like rebuilding Haiti after the earthquake are a secondary priority as international development funding also gets capped.  All in all, this is much more representative of the Conservatives vision of Canada, unfortunately it has nothing to do with a proactive vision for the future.

The Budget contains no big surprises but is still a big disappointment. Despite the fact that unemployment is and will remain very high, economic stimulus measures effectively end after this year. A few very small new investments in jobs and skills will be made, but they do not amount to even the beginnings of a strategy to build a new economy. There will be a temporary extension of EI work-sharing, but about 500,000 unemployment claims filed during the Great Recession will still be exhausted. Corporate tax cuts continue, and are even modestly increased in this Budget, so the burden of deficit reduction will fall on government programs. Despite very low interest rates and one of the lowest debt levels in the advanced industrial countries, federal program spending will be slashed. Spending on international assistance is to be frozen.

While the world’s and Canada’s economic recovery is still very fragile, the Harper government has decided to focus on eliminating the deficit. Creating jobs would help balance the books at far lower cost.

The full CLC Budget Analysis can be found at:

http://www.canadianlabour.ca/news-room/publications/2010-federal-budget-canadian-labour-congress-analysis

And a more condensed version is on rabble at

http://www.rabble.ca/news/2010/03/budget-delivers-cuts-not-jobs

I did not make it to the federal budget lock-up, and having pored over the document I am pleased to say I missed it. There is very little in this budget that one would expect of a budget in the midst of a recession (the GDP numbers have turned up, I know, but unemployment is still high and could continue to rise for a while if past recessions are any indication). OK, I have not looked into every nook and cranny, and did not have Finance officials around this time to decipher pieces of the budget – the feds love long budgets that give precious little detail, especially if something is new money or spent over many years – so there might be some additional stimulus action hidden in there. But it seems to me that most of the content is recycled from last year’s budget, a reannouncement of what the government is already doing (”Great job, Harpie!”).

For example, look at Table 4.2.2 on page 173, which tells us the fiscal magnitude of actions taken in this year’s budget. It shows 2010/11 with a status quo deficit of $48.9 billion. New measures proposed in the budget total $1.1 billion, offset by $800 million in cuts elsewhere, for a net increase in the deficit of $300 million. Underwhelming, to say the least.

Which makes it somewhat better (but not much) than the TV commercials about Canada’s Economic Action Plan, which seem to be more about reinforcing the Conservative pre-election talking points about how strong they are on the economy than telling people information they need to know (and extremely deceptive at that, with many of the recent batch of commercicals on Employment Insurance, an area where the Conservatives have done next to nothing).

Like the commercials, the budget is used as a policy platform for the next election (this itself a recycling of the 2006 Advantage Canada document that also came out at budget time). Rather than actual budget actions, the “budget” goes on and on about plans to boost Canada’s “competitiveness” (would someone in Ottawa please define that term and tell me how it should be measured?). In doing so, they pull out all of the chesnuts of neoliberal policies past. Canada will have the lowest rate of corporate tax in the G7 by 2012, a measure that Bay St will love but that will do little for real economic development in a nation that badly needs a vision (zero poverty and zero carbon would be a good start). No, instead it is more of the same: Foreign investors, please come and create jobs for us! Look how competitive we are! Please!

Also on the “competitiveness” front is a renewed attack on regulation. For those who have been paying attention, the feds have played this game over and over again going back to the early 1980s. It is hard to believe there is any red tape left for a newly minted Red Tape Commission to cut, because once you look closely at regulations, they seem to be there for good reason, darn it. Previously, the government announced in the 2007 budget the Cabinet Directive on Streamlining Regulation, which places “competitiveness” hurdles in front of any new regulations, and subjects the whole of existing federal regulations to those standards.

Why then do we need a Red Tape commission? Like tax cuts, I suppose one can play this one over and over again and still have it sound good. But truth be told, this is not just silly politics from Ottawa. Things can indeed get worse. For example, there is this doozy on page 104:

The Government is taking steps in Budget 2010 to further improve the regulatory review process for large energy projects. Responsibility for conducting environmental assessments for energy projects will be delegated from the Canadian Environmental Assessment Agency to the National Energy Board and the Canadian Nuclear Safety Commission for projects falling under their respective areas of expertise.

So we’ll just not actually do any environmental assessment in the tar sands, on major new pipelines of natural gas, or on nuclear power. Great.

I am pleased to announce John Loxley as the winner of the 2010 John Kenneth Galbraith Prize in Economics. John will be joining us in Quebec City during the Canadian Economics Association meetings at the end of May to give the Second Galbraith Prize lecture. Please join us if you can make it!

Below is an overview of John’s credentials for the prize from Jim Stanford.

On behalf of the PEF membership, congratulations to John, and a big thank you to this year’s JKG Prize selection committee (Mel Watkins, Armine Yalnizyan, Erin Weir, Brian MacLean and David Pringle).

****

John Loxley and the 2010 John Kenneth Galbraith Prize in Economics

Throughout his adult life John Loxley has worked to combine economic analysis, research, and publishing of the highest quality, with a deep personal commitment to social change and building the social change movements which will be the engine of change.  It isn’t enough for progressive thinkers to simply put the ideas out there and hope that someone does something about them.  We all have a responsibility to use whatever resources, platforms, and leverage we may have in our respective positions, to further in concrete ways the development of the movements and campaigns that will be essential in actually achieving the change that we envision.  John Loxley, to me, embodies that necessary duality between intellectual work and nitty-gritty movement-building.

His academic research in the fields of development economics, international monetary and financial systems, and community economic development, have been recognized internationally as making a substantial contribution to progressive thought in those fields.

However, it is more through his enduring and important personal commitment to activism that John has really left a lasting benefit for social change efforts in Canada and around the world. Despite his deserved international reputation, John never shied away from getting his hands dirty in the trenches of social change activism and organizing.  He has been consistently and heavily engaged in a range of different social change initiatives, projects, and organizing — ranging from his work with the North-South Institute and international debt justice initiatives, to his work co-founding the Choices coalition in Winnipeg and through it inspiring the Alternative Federal Budget (which this year will mark its 15th edition — an impressive and consistent record), to his personal involvement in a range of grass-roots economic development initiatives with First Nations communities in northern Manitoba.  John is always respectful and collegial with his fellow social-change activists, and never “lords over” them on the strength of his intellect and reputation.  He personally practices what he preaches, through his ongoing passion for and contribution to social change.

In addition to his personal research agenda and his personal involvement in a wonderful range of activist struggles and initiatives, John has also made a priority over the years of helping to build the University of Manitoba’s economics department into a well-regarded, collegial, and open-minded academic program.  This involves his unique ability to reach across normal ideological divides in the interests of building an inclusive, diverse, respectful, and workable department that fills a totally unique niche in Canada’s academic economic world.

I don’t know anyone in Canada who better embodies the spirit of engaged, activist intellectual work that we seek to honour with this award, than John Loxley.

Jim Stanford

The 2010 BC Budget was a disappointment on the climate action front. Even as Premier Campbell waxed in the Globe about the impact of climate change on the 2010 Spring Games – with its sunny days, crocuses, daffodils and by the end, cherry blossoms making it fun for people on the street but a big mess up at Cypress Bowl for a number of events – the budget offered little assurance that this government still cares.

Instead, the budget better resembles the Olympic flame, whose massive size and burning cauldrons made a fitting monument to the oil and gas industry, a testament to our brazen capacity to burn fossil fuels. Subsidies to the oil and gas industry remained untouched in the budget, and in fact royalties from the sector are half of levels in previous years, in part due to royalty reductions from last August’s “oil and gas stimulus package” (like they really needed it). In addition, the budget’s transportation investment plan, 86% of provincial funds go to roads and bridges, including favoured projects like the Gateway highway expansion program and the “oil and gas rural road improvement program”.

There was some expectation that the government would announce a plan for the BC carbon tax, which hits $30 a tonne in July 2012, then hits a wall. If I was a business in BC, I would want to know the outlook post-2012 and what this meant for capital investments in the near term. But there was silence on that front, nor any expansion of the tax to cover major sectors not currently covered by the tax, including aluminum, cement, lime, and (you knew this was coming) much of the oil and gas industry.

From a climate justice perspective, more troubling is the failure to improve the low-income carbon tax credit, which more than offset the carbon tax for the bottom 40% of income earners in year one (starting July 1, 2008), and was roughly neutral in year two (July 1, 2009). The growth of the credit is not keeping up with the growth in the carbon tax, and will make the overall regime regressive as of July 1, 2010 – thus placing a greater burden on low-income folks who have done the least to contribute to the problem in the first place.

Since its inception, the carbon tax and revenue recycling regime was regressive at the top, meaning the top 20% of income earners get back more in tax cuts than they pay in carbon tax. The government’s unwavering commitment to use carbon tax revenues to fund personal and corporate tax cuts that are not needed and will have essentially no economic impact also deprives action on things that really would change behaviour, like improvements to service for public transit (the latter being a fascinating experiment and positive outcome of the Olympics). True, the government has put in funds for the Evergreen line, but hamstrung Translink’s ability to raise funds to actually get the project off the ground.

So overall, we need some regime change on the climate front if BC is to live up to its rhetoric and awards from environmental groups.

The budget does breath some new life into LiveSmart, a program for energy efficiency upgrades that ran out of money last year when it was oversubscribed. Too successful for its own good, the program withered. The budget provides new money of $35 million over three years, which is better than nothing but rather small. It is a lost opportunity given that unemployment rates are double what they were a year ago, and this work develops green jobs. There are some flaws in the program that still need to be fixed; for example, it encourages use of natural gas furnaces and hot water heaters that produce the greenhouse gas carbon dioxide when used.

In addition, the budget commits $100 million over three years to vaguely defined “climate action and clean energy”, which is linked to an upcoming Clean Energy Act to be tabled this sitting that has many concerned about the province running roughshod over local interests to ramp up private power production for export to the US (perhaps in conjunction with a new deal signed by Campbell and Schwartzenegger during the Olympics). The budget states that this money will be used to support investments (read: subsidize private sector) in biofuel production, new electricity generation and “infrastructure to support cleaner transportation choices”. While some of this may be a useful contribution, we will have to wait for more details when the new legislation is tabled.

As if there weren’t already enough reasons to eliminate the egregious stock option tax loophole, a column by Eric Reguly in this month’s Report on Business magazine highlights yet another.  This reason helps to explain why we had such a booming stock market up to 2008, but little growth in real investment and productivity.

First of all, the stock option deduction, which allows those recipients of stock options to only pay half the statutory rate of income tax on their gains is:

Expensive, costing Canada’s federal government an average of almost $1 billion a year in foregone tax revenues annually during the past five year, according to Finance Canada’s tax expenditure accounts.

Unfair, with the benefits going overwhelming to those with the highest incomes, including CEOs, as Hugh Mackenzie has outlined in his annual CEO pay  report for the CCPA.   For example as I showed a few years ago, this tax loophole saved Robert Gratton, former CEO of Power Corp over $24 million in federal income taxes, just on one year’s income.  This is a major reason why some of the highest paid people in our society pay tax at a lower rate than ordinary workers.

Distortionary and destabilizing, creating the misaligned incentives and pay structures that reward short-term risk taking that Bank of Canada governor Mark Carney identified as one of the key reasons for turbulence in the financial markets in a speech he gave two years ago.

Bu there’s an even more devastating reason why the tax loophole for stock options should be eliminated: it has been very damaging for the economy.

Research by William Lazonick, director of the Centre for Industrial Competitiveness at the University of Massachussets, shows that stock buybacks–using a company’s funds to buyback its own shares–has swallowed up an enormous amount of the income of major US companies.   Canadian companies have also put increasing amounts of their income into stock buybacks and not into more productive investments, as I outlined a few years ago.

The stock buybacks have resulted in pretty blatant stock price manipulation, boosting stock price value for these companies, and paying off very handsomely for those who hold shares, which includes most CEOs and senior executives, especially since they only pay half the rate of tax on these gains.   It’s been great  for shareholders and other employees who also own shares, at least in the short-term.

The problem is that in the long-term it has bled the economy of real investment in the economy.  As Reguly writes:

Every dollar spent on buybacks means one less dollar spent elsewhere-on R&D, on training, on equipment, on creating employment, on innovation. Ultimately, competitiveness and economic growth suffer.

This issue is related to the broader discussion we’ve recently had on this blog about the ineffectiveness of corporate tax cuts.

Lazonick ties this to a broader crisis of US capitalism’s “New Economy business model”, says we should ban stock buybacks where they are used to manipulate prices, and writes that the:

The government also needs to enact legislation that drastically reins in top executive pay, which means placing restrictions on stock-based remuneration, especially stock options.

We will soon see in the federal Throne Speech and budget what Canada’s federal government has planned to revitalize Canada’s economy coming out of this recession.   But if it is just more faith in the same old simplistic laissez-faire Advantage Canada framework without fixing any of these problems, it will have very little success.

[Notes from Marc and Iglika]

For a document titled Building a Prosperous British Columbia, the 2010 BC Budget is underwhelming in its ambition. Budget 2010 shows a government talking a lot about the legacy of the Olympics but lacking any coherent vision of how translate upbeat sentiments into real improvements in British Columbians’ standard of living.

This budget says “steady as she goes”, but it is not clear where we are going, and whether the budget does enough relative to the challenges that may be ahead. The downside risks for the BC economy are serious: the US economy remains very weak, as is central Canada. The Winter Games are over, and in Olympics past have been accompanied by a drop in economic activity. And even though many feel we are in recovery territory, rising GDP coming out of a recession is typically accompanied by rising unemployment for at least another year. There doesn’t seem to be a clear economic development plan to provide jobs for those who lost theirs during the global recession.

The budget’s priority is to show a reduced deficit for 2010/11, funded by a smattering of spending cuts that will not help the province’s economic situation. This drop in the deficit by $1.2 billion (from $2.65 billion in 2009/10 to $1.4 billion in 2010/11) is partially offset by increased capital spending. So, a check mark for accelerated capital projects that push total envelope to $5.4 billion in 2010/11 for taxpayer-supported projects (up from $4 billion in 2009/10). There is a drop in other (self-sustaining capital projects), but an overall increase in total capital spending to $8.2 billion. Not all of this is well spent, such as $390 million this year for the BC Place roof upgrade.

The budget heralds a return to conservative budgeting practices, with numbers set out in a way that ensures the government will outperform the targets. Barring a major economic collapse, BC will rebalance the budget sooner than the stated 2013/14. For example, the budget estimates a deficit of $145 million in 2012/13, peanuts relative to more than $40 billion in revenues. But if resource royalties bounce back (as higher commodity prices seem to indicate) the shift back to surplus could happen even further ahead of schedule.

A number of ministries saw budget cuts, led by the Ministry of Forests and Range, with a one-year cut of 35% (a drop from just over $1 billion in 2009/10 to $641 million in 2010/11, and this is on top of previous cuts. This will hurt in smaller communities around the province. Other ministries received cuts that were small by comparison, typically in the tens of millions of dollars. Translated into public sector jobs, there is a continuation in the reduction in FTEs from peak of 36,277 workers to 32,000 by 2012/13.

The government introduced a few new spending measures, and health care gets a 4.7% increase above 2009/10, but we remain low among other provinces in terms of health care per capita. For regional health services this means an extra $396 million on the heels of a $360 budget shortfall last year. The new budget does not leave health authorities much room for enhancing seniors’ services or revitalizing support for mental health and addictions programs and other preventative initiatives that would improve the health of British Columbians and reduce long-term health care costs.

That health care is the big winner on the spending side reiterates how popular the program is, but also sets up a narrative that health care increases are eating up everyone else’s share. To show this, the budget makes a commitment to put all HST revenues to health care, yet another budget gimmick that those in the lock-up saw straight through (this is nothing new for BC, as the old PST was properly named the Social Services tax, brought in to fund health care decades ago).

BC families hit hard by the recession will see little from this year’s budget. The new property tax deferral measure announced applies to homeowners only, leaving out a large number of families with children that are priced out of the housing market.

In addition, this new tax deferral measure will just pile on the already high levels of household debt in this province, a two-edged sword. Fundamentally, BC families do not need yet another source of credit. They need jobs that pay living wages, they need affordable housing, high quality accessible early childhood education and care programs for their young children, and enhanced opportunities for their school-aged kids to participate in arts and culture as well as sports programs.

There is nothing in this budget to address child poverty, which is currently the highest in the country and has been so for six years running. Clearly, existing initiatives to support families with children are inadequate, but this budget does not address this gap. Similarly lacking is money to house the homeless or build new social housing. In fact, the Estimates show cuts in the Ministry of Housing and Social Development’s employment and housing initiatives.

The increased funding for community sports and the arts, $60 million over 3 years, is more than welcome but it falls far short of filling the enormous gap left by the discretionary grants cuts in last year’s budgets, much of which went to funding similar activities.

Funding increases in education and social services are small, barely keeping up with inflation and the increased downloaded costs. There are some additional funds for full-day kindergarten, and an additional $26 mil over 3 years on child care subsidies for low and middle income families, but no new operating funding to enhance the accessibility of child care spaces.

The budget announces additional ministry cuts to the tune of $320 million over the next three years. This comes on top of previous cuts announced last year – a total of $3.3 billion over three years in “administrative and other savings.” BC’s public service is already the leanest in the country as this recent CCPA brief shows and it is wishful thinking to assume that these cuts can be made without compromising much-needed public services.