Tag Archives: economy

Soap Operas in the News

We find ourselves in the middle of a well-known curse, for it is true that we live in interesting times. Common sense has fled, as has basic numeracy, and our media fails us yet again, for the story isn’t about what is going on, but about the cut and thrust of competing sound-bites.

Truly, this is an era — internationally, federally, provincially and municipally — where soap opera has taken over all programming.

Delays of Our Lives

Does one hand know what the other hand is doing? Can anyone count? The current contre-temps in Ottawa is Conservative claims that the Senate (dominated by the Liberals) is hold up their spending bills, while, at the same time, Liberals claim the Conservatives could move faster. Go figure.

Do any media hosts point out that the bills in question arrived in the Senate only last Thursday and that they are already in committee? No, they do not. Instead, the story becomes the current line of “they’re not pulling EI changes out”. Good heavens, an ever-shifting target — on both sides of the aisle — is all that is deemed newsworthy now. It is the game of “he said, she said” and no logic applied.

As The Stomach Churns

Then there’s the meme of the “ever worsening economic conditions”. Does anyone ask why any of us should expect that anything done to intervene could have made a difference when it is historically established that monetary policy changes take nine months minimum, and as much as eighteen, to work their way into the economy and make a difference? Fiscal policy changes are typically a year or more into the future as well, yet the charge is “not good enough, do more” mere days after action is taken.

We are staring at an abyss, mostly brought about by our own bad policy decisions. So far, in listening to the English-language news, only the Australians (ABC Radio National) seem willing to actually add up the days, challenge the wisdom of doing more until the last actions have had a chance to work, etc. But in most of the rest of the world, no one is asking the question: they simply echo the Opposition’s standard mantra of “not good enough” (wherever they are). It is certainly no different here.

Meanwhile, of course, we are not solving the underlying issues. It is now clear that systematic embezzlement and pyramiding of risk was undertaken, yet we seem determined as international policy to leave it all in place. No wonder there is no confidence. Do you hear anything of this in the stories? No.

General Horses**t

Meanwhile, of course, we all stumble down the same paths while blaming other governments. “It’s not our fault, it’s theirs” has become as much of a meme as “they’re not doing enough” has across the aisles of our legislatures.

Let’s be clear: just because everyone else wants to, lemming-like, be an idiot, why does this require you to be one?

Countries (the UK, Germany) are already having trouble selling their government debt. In the case of Germany, this is the strongest part of the EU: we are not dealing with minor nations here. US debt demand is crowding out everyone else — including corporate needs, as businesses closing around the world because they can’t sell their debt at any price shows — and yet everywhere, from profligate provinces to spendthrift nations, there is an assumption that this paper can just “be placed” — and at rock bottom interest rates, too.

Again, where is the media, adding up the deficit numbers and asking where the placement money will come from? That might actually require the ability to add 2 + 2 and get 4, so forget that. Far easier to put on competing talking heads yelling at each other, isn’t it?

Beast-Enders

Here is where this sorry story will end: governments will fail. Provinces and states will have no choice but to wholesale chop their core programs for lack of funds. Nations will have no choice but to let inflation loose — and it will rise as interest piles up on the debt they’ve added. Trade deficits will lead to protectionism and further reductions in economic activity, as will the disappearance of more and more companies and with them their activity.

Where will what’s left of the media (for it is not immune to this) be? Carrying the screaming and reporting on the riots — but never, never pointing out how we’re headed toward this due to our choices today.

After all, the talking heads won’t point that out, and the idea of putting a story in context died a long, long time ago.

Constipated Street

The refusal of the media to do its job had its roots in the ease with which they could put talking heads on the air. Real investigation, and working out how to make it approachable for readers, listeners and viewers, costs more money than opening the phone lines or letting people shout at one another does. If today the media is looking at its irrelevance and shrinking audiences, it has only itself to blame — well, that and the theory (advanced by the media) that concentration of ownership was a good thing, especially using debt to make the concentration work.

The refusal of politicians to tell the truth to the people — to treat them as citizens, not as consumers — is also a key part of this. Anyone with two brain cells to rub together can look at the banking “industry” (there’s your first sign of failure: banking is a “utility” and thus requires utility-style regulation) in the US, UK, etc. and see that the old Glass-Steagal and pre-Big Bang rules served those nations well — and that the current regime, of collateralized debt obligations, mark to market securities, liar-loan risk on mortgages, etc., has not. We might disagree about how to fix the situation, but the source of the problem is clear. It’s even bipartisan: the Conservatives made it happen in the UK and Labour has extended it; the Democrats made it happen in the USA and the Republicans extended it. Yet the issue cannot be spoken of — and the media only speaks of it in partisan terms.

No wonder our countries are dying. Systematic mediasclerosis and the big lie sound-bites will see to that. No wonder, too, the average person now has no confidence in the political system, the fixes on offer, or the news and reporting they see, hear and read.

No wonder, too, that so many dedicated bloggers have lost interest in blogging lately (myself included). There’s a feeling of ennui abroad that the train wreck is inevitable.

This is what happens when politics and the news and analysis work of the media degenerates into entertainment — and nothing more.

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Deflation is the Name of the Game

You are worried about your job. There are rumours of layoffs; your in-laws’ pensions might be at risk because the company they worked for for years is teetering on the edge of bankruptcy. Meanwhile, as the malls empty, sale prices abound. Sitting there on the table in front of you is a pile of credit card bills, mostly priced at something over 18% interest …

Is it any wonder you’d be taking any spare cash, and any “stimulus cheques” (like the carbon tax offset in BC, or the ones sent out earlier this year in the US), and paying down that debt? That you’d be cutting back on your own spending (“it’ll be cheaper still in a bit”) and, after years of not worrying too much, socking upward of 15% monthly into your own personal rainy day fund?

Now, tell me: if Jack Layton’s beloved “ordinary Canadians” are smart enough to figure all this out, why can’t professional economists and politicians?

This morning I arose to find the Prime Minister’s musings on opening our wallets to spread cash around. As with most “professional” economic thinkers, the answer to deflation is deemed to be ever more liquidity and cash injected into the system, to get people to spend. Slightly more sensible — but note the word slightly — was the view of the economists working for those paragons of greed, the banks. The sensible part is building infrastructure for the future; the really silly part is using borrowed money to do it, rather than doing what Joe and Jane Canadian are doing: cutting out unnecessary expenditures, making choices between this and that, getting in the black and conserving cash.

Ah but, Monty Python style, the Sensible Party has morphed into the Silly Party overnight — with the Really Silly, Outrageously Silly and Perpetually Offended and Deeply Silly Parties sniping from the corners. I don’t know what the headline writers will do with Prime Minister the Rt. Hon. Tarquin Fintimlimbimlimbimwhimbimlin Bus Stop Ftang Ftang Olay Biscuit Barrel, but that’s where we’re headed. Probably call him Oil of Olay for having slid one by us all in the last election or something.

One would think that eighteen years of experience in Japan since 1990 might have provided a note of caution before Canadian policy makers had rushed to the “throw money at the problem and worry tomorrow about how to pay for it all” school of economics — the real Keynes would rise up in righteous anger at this misuse of his ideas if so many experts weren’t piled higher and deeper upon his grave — but after all, if you’re liberal in your thinking, history is bunk and means nothing. (Besides, didn’t Japan recently call on the rest of the world to copy their 0% interest rate and 180% of GDP debt ratio policy on the grounds that “it hasn’t worked for us, but maybe in 2008 it’ll work now for no good reason”? Don’t they call it insanity when you try the same thing again and again in an unchanged environment and expect the results to differ “this time”?) The words of others, however, loom large: “they’re doing it, so we should, too”.

Lemmings walking off a cliff into the sea couldn’t do a better job. Or are our political figures all locked in their high-school years, where peer pressure can outweigh almost any consideration of rational and moral behaviour?

What is far more likely to happen, should we walk off this cliff, is the sort of thing James Howard Kunstler has often written about in his blog, Clusterfuck Nation. People praise Franklin Delano Roosevelt for the New Deal: they forget that the Great Depression was intensified as he spent the US Treasury bare, didn’t get results, and was forced to trim back and increase the tax bite simply to stand still back in 1937. We have been suffering from an excess of money creation via credit and prices and M3 (money in circulation including credit) must reset for the economy to improve. We can try to forestall this, in which case the deflation drags on and on, the damage gets worse and worse, our public finances go back into the toilet and down the drain, Canadians become ever-more impoverished … or we can change the way we live to recognize that the era of excess finance we have lived through is gone forever.

Government, as we know it, to survive, will shrink — or we’ll just end up doing away with it. Money, as we know it, to survive, cannot be inflated to a fraction of its current value — or we’ll create some non-government money and go “off the books”. Communities will have to be more local and more self-reliant: big corporations, big unions, big governments and big continental scale anything is a function of cheap and abundant resources, and while there’s lots of resources left the cheap and easy to get ones are mostly used up. (Don’t be fooled by the recent collapse in oil prices — that was the blowing up of the bubble in commodities as yet another haven in the markets from the last destroyed bubble in real estate — look instead at the supply and demand situation.)

In a deflationary period — common in the nineteenth century, rare in the twentieth, and now present in the twenty-first — you keep real interest rates high enough to make savings and investment pay; you minimize unnecessary expenditures, you focus your resources, you encourage initiative and new sources of economic activity rather than prop up old ones and you make money into a stable store of value.

Unfortunately, for those who drew the lesson that you flood the system with ever more bail out money and “liquidity” when the problems are ones of insolvency, radical misallocation of resources and too much unproductive activity draining the real economy, ramping up the printing presses and dropping bales of cash by helicopter is just too tempting. Besides, for the power-lovers, who gets the handout, and on what terms, holds far more reward than does their own restraint.

In the words of W.B. Yeats, in his poem The Second Coming:

Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Sauve qui peut!

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Enough Bailing, Let’s Move Forward

There’s a view we all — at one time or another — come to hold: “things shouldn’t change”. For the religious, this line may be drawn where the society has become increasingly post-religious. For the neighbourhood, this line may be drawn where the sense that things are changing for the worse has erupted, and NIMBYism takes hold (“not in my back yard”, a close cousin to BANANA — “build absolutely nothing anywhere near anyone”). For the employer, it becomes the cry to bail them out.

This morning on CBC Newsworld the thoughts of Oshawa-area (GM plant) employees were heard. “Don’t let Oshawa [the town] die. GM doesn’t deserve a handout. We’re all driving vehicles that should never have been produced and that’s got to change. But don’t kill the city.” Unfortunately, if Oshawa is GM, bailing out acknowledged mismanagement at GM would seem to be the order of the day.

Well, let it go. Yes, life in Oshawa may get tougher. How was it for the workers whose jobs were sent to the US — to Mexico — to China? You can either roll over and slowly fade away, or you can roll up your shirt-sleeves and start creating local employment again, under local control, that meets real local needs (so moving to tourism, for instance, is not what I’m talking about).

What’s being said in the calls for bailout money is the following:

For the province, it’s McGuinty saying “I don’t want to have to make tough decisions, so just fund all this and I can continue to pretend all is well”.

For the city, it’s its mayor saying “Oh, God, we can’t afford to exercise our responsibilities for the essentials and I have a whole programme of frills anyway, so bail out the employer and I won’t have to deal with it”.

For the worker, it’s “save my job” on the one hand, and “let all my company stock that infests my pension savings go up” on the other. Heavens forfend that managing risk should have been his or her responsibility. (How many families, too, have both parents and often the eldest child working for the same firm that their savings are tied up in, and their home’s asset value depends upon?)

There is a limited amount of tax revenue available — and an infinite set of demands upon it. Choices must be made. (If you don’t want to deal with choices, get the hell out of politics: it’s what came with your election.)

For instance, making it possible (through zoning change) to densify neighbourhoods with laneway and coach houses, authorised “mortgage helper” basement apartments, and the like would help people retain their homes even if they are laid off — or find a place to live by creating new rental space. More zoning change would put local services in local neighbourhoods, making shopping a walking experience — and supporting more alternative forms of employment locally. So, too, would allowing more businesses to operate from residential areas.

This, in turn, would make investments in transit infrastructure pay off. Electrify the system (trolley buses, trams, interurban rail) and it survives and thrives in oil supply uncertainty (which is coming, and quickly). The net effect is that the town becomes a place to come to, not a place to flee from.

Of course, if you’re GM, or Ford, or Chrysler, the idiots in middle management and in the executive suites who ignored reality for years need a good housecleaning — also a function of not bailing them out and forcing them to deal with their bankrupt state. I say “idiots” because playing bureaucratic games with each other was far more important to addressing the obvious. After all, if Toyota, Honda, BMW, etc. can make quality products that sell for list because they don’t have to be discounted to shift the goods, and can have unionised employees do this, doesn’t it say clearly that management let the North American auto industry down?

Whether it’s banks, automakers, or whatever, risk should not be pushed off on the taxpayer while profits accrue to the managers and shareholders. Resist the urge to bail out, and instead make choices about investment. (This, by the way, is also required with existing government programmes at all levels: clean house and free up resources.)

If Canada, its provinces and its cities did exactly that, we’d have the leverage point to go with our natural resources and sensible anti-deficit financing model of the last decade, and the twenty-first century truly would belong to Canada.

Or we can be idiots and follow the Americans, the Brits, etc. down a rathole. Choose!

When the Centre No Longer Holds

Twenty years ago, I first came across the notion of megapolitical analysis in James Dale Davidson & Sir William Rees-Mogg’s book Blood in the Streets. A megapolitical analysis tries to get up above events and see the larger pattern that exists. Assuming you’ve done your analysis correctly, what you’re looking at is the structural situation.

An example may help. In the late 1800s, Western nations had the machine-gun (whose efficacy had been proven in the American Civil War and confirmed in the Franco-Prussian War of 1871) and other cultures did not. When the British, for instance, tired of raids by the Dervishes from Sudan into their Egyptian protectorate, they sent a single river gunship up the Nile. The Dervish leader assembled 10,000 of the famed “Whirling Dervishes” — owners of a feared technique for sword fighting that gave them the mobility of a sole fencer and the ability to defend each other that the ancient Roman phalanx structure had given the Legions. From the deck of the gun ship a machine-gunner opened fire — and kept firing. 10,000 Dervishes went a-whirling to their deaths. The British nursed their sunburns and that was that.

In the second half of the nineteenth century, therefore, offensive weaponry like the machine-gun would win the day over any pre-automatic weaponry. A megapolitician would have concluded that Africa and Asia were to experience their almost complete colonisation by Europeans — and they would have been right.

Compare that to 1979, when the former Soviet Union moved into Afghanistan, and discovered that 50,000,000 ruble MiGs could be shot out of the sky by a lone Pashtun or Taliban soldier with an AK-47. Today, the projection of force requires highly expensive weaponry and sophisticated command and communications structures; the defence can work cheaply and melt into the hills/bushes/jungle as needed. Today, a megapolitician would say, again with confidence, that the cost of projecting force against an enemy who only needs to wear you down to make you go away (and thus, win) means not only that colonisation is at an end, but also the ability to “settle” a restive periphery. Today we live with the raids; we can’t “go upstream and settle the matter”. (Yes, as Thomas P. M. Barnett pointed out in The Pentagon’s New Map, the US military has the ability to project force (almost uniquely today) and “smash” any region they choose to in a period of a few weeks — but they lack the ability to pacify it, to establish a new stable order, or to make the “smash” deliver the results they seek. Nor can anyone else. The best we can do is tie up those who would take the battle to us in their homes — but we can’t “win and go home”. To go home, we must admit defeat and leave, tail between our legs.

For the projection of force has become affordable and practical for anyone — and so the advantage is to the nimble defender who knows local ground.

Countries of small scale can be held together more easily than those of larger scale: it is easier to project the necessary force across a smaller distance, allowing efforts to be concentrated. As we saw with the end of the former Soviet Union — the last of the great European empires to “come apart” — the effects of different cultures spread across a large land mass and the difficulty in projecting power in a collapsing economy forced the Union apart. The resulting Russian Federation has been plagued by insurrectionist movements since — not to mention worries about losing Siberia to surreptitious Chinese migration (which reminds me deeply of the individual settlers dashing into the West Bank following the 1967 Six-Day War from Israel and planting themselves there: not government policy, but a “situation on the ground” being created by individuals that then leads to government action for a long time to come).

We sit here, in Canada, in the United States, in Australia, and we think “it can’t happen here”. But it will — two decades from now, I doubt any of these countries will have survived intact.

Holding a continental-scale country together is — as it was for the Roman Empire (and many other large human enterprises in history) — a challenge of maintaining growth. Technologies that speed transit times (to allow for sudden power projection: ask Louis Riel and his fellows if they expected the CPR to deliver the Militia quite so quickly and effectively!), and speed commerce; an economic engine for growth; access to affordable resources in growing amounts to deal with a growing population: these are the tools (others are analogues to them) to hold a large scale anything together.

Once the engine of economic growth falters, it must be restarted on a new and viable footing, or it decays into a period of milking the past and exploiting it for ever-more concentrated gain. Once new technologies that add speed and ease of movement cease to be invented — and cease to be invested in — those who would tear the territory apart have time to figure out how to deal with what is now a “static opponent”. Once resources are no longer easy to exploit or cheap to extract/purchase, every projection of power becomes an economic calculation (“do we really need to intervene here, or should we hope this problem solves itself and save what we have for another, worse situation?”). Eventually, increasing costs of energy, transport and materials, and the milking of a dead economic model, means that the battle goes to those who would impose an “iron hand” and “control waste”. Roman Senators give way to Emperors, who give way to a civil war for control of the seat of Augustus — until the Empire is no more (transformed into a religious state in the East, and sunk into the Dark Ages in the West). Long before, the ability to deal with issues at the periphery had meant just letting it go its own way.

Where we are today, of course, is well advanced into the decay of our economic engine that served us well from the 1770s through to 1973: industrial production. Today we offshore the production and focus on manipulating symbols: increased investment in legal trickery, tribunal “justice”, obscure financial instruments, mergers & acquisitions, downsizing and country-shifting to squeeze a little more lucre out of a stable enterprise … the list is long. That it has blown up into a huge balloon that must now wreak its destruction on what’s left of the middle class and productive enterprise is no surprise: indeed, as Schumpeter noted, it’s necessary to remove the old to create the new. A class of courtiers, fixers, manipulators and money men instead decided to establish a rentier culture, cream off the wealth for themselves, and not let their “cash cows” be displaced. (Chrysler, for instance, should have died in 1980; instead it has continued to destroy wealth and future prosperity for another 28 years.)

Add to this ever-more expensive energy — and its concomitant, food — a political class that meddles incessantly — and the stage is set for regional rebellion.

Eventually those that are constantly milked to keep the dying lands alive a little longer will say “enough”. Eventually the cities will decide the interior towns don’t matter. Eventually the three time zones from Ottawa to the Pacific shore will loom so large that the relationship will be seen as pseudo-colonial. A Newfoundland with wealth will ask why it does not reassume its former independent Dominion status. It will then take only the neo-Feudalists to arise and declare “order” over small territories and the splits become real.

Western Australia has nursed grudges and felt ignored and milked for nearly 80 years: now it is the sole part of the Australian economy that supports all the rest. Washington, Oregon and California find Washington unresponsive to their needs and far too far away — meanwhile the Inland Empire of Washington State can’t fathom those around Puget Sound (and the same, too, as you go down the coast: it is the same division you find in BC and Alaska). So when the fracturing begins, it will carry down deeply: a province or state might declare unilateral changes in its relationship to the nation, but it will take but a few months before it, too, starts to come apart at the seams. (To see some of the seam lines, read Joel Garreau’s The Nine Nations of North America.)

When the centre no longer holds, life, which has gotten harder and continues to do so, will suddenly get very much harder. Energy will be expensive; we won’t travel freely. We will be back to eating with the seasons and what is available locally. Democracy will likely fail, to be replaced by overt despots. The world will suddenly have 300+ … 400+ … 500+ “countries” (few of whom will worry about affording diplomats in very many places).

Megapolitically, all the things that consume us today in politics, sport, entertainment and scandal will seem very unimportant and very far away.

I take no joy in saying these things. But they should be discussed. Only by doing so do we hold onto Carroll Quigley’s hope, in The Evolution of Civilizations,, that once again we in the West will reinvent ourselves and prosper again. Waiting until the crisis is upon us will give up the one major advantage we still have — scale — to work to give new means and methods room to breathe.

No, The Government Collects Far Too Much Tax!

Lawrence Martin, in his column in this morning’s Globe and Mail, raised the notion that the economy is slipping into stagflation (I agree) and then that the Harper Government would “miss the revenue” it “gave up” through the GST rate cuts. He may well be right that the Conservatives will miss that revenue: goodness knows, they’ve acted far more like bloody Liberals than Conservatives in office, spending like drunken sailors with no clear purposes, no vision, emerging. But I profoundly disagree with the notion that underlies Martin’s thought, which is that the problem with stagflation is a lack of revenue with which to intervene in the economy to “right matters”.

Let’s state my thesis clearly: it’s not the Government’s money; it’s mine.

I am not an anarchist: there are proper functions for government and I have no objection to paying my taxes for them. Nor do I have an objection to government taking on a visionary capital investment programme — akin to Macdonald’s building of the Canadian Pacific, or Laurier’s building of the National Transcontinental — that leave us with a legacy of much-needed infrastructure.

I am, sorry to say, deeply opposed to what are in essence handout programmes that expend operating monies year after year without end: there may well be a need for one of these from time to time, but the case must be made — and the case to continue them must also be made. If I could but wave a magic wand and make one change in the country, it would be to automatically attach sunset provisions to each and every spending programme put forward at all levels of government, forcing politicians to pass them, again and again, in order to continue them. Many, I daresay, would fail to get support the third, fourth or fifth time around: new ideas would almost require the weeding out of old, stale efforts.

(Any programme that achieved 96% of its “total mandate”, for instance, qualifies as “stale”. Pareto’s Law states that the first 20% of the effort will produce 80% of the final results. Two “Pareto cycles” and 96% of the mandate is accomplished [80% + 80% of the residual 20%]. Everything after that plays to deeply diminished returns, and costs at least as much, if not more.)

So, Mr. Martin, if you’re worried about stagflation (the combination of declining economic activity with price inflation) — and I am; the Bank of Canada, with its two rate cuts this year, has practically guaranteed it — the issue is not “whether the government will regret limiting its revenues”. The issue is “what are they going to stop doing in order to find money for whatever programmes they think will ameliorate the pain of stagflation”.

Do we need, for instance, to be funding sports? Why? So that we can afford to play the “undetectable chemical athletic process” that international competitions are laced with? So Canada actually sends true amateurs — who are not people funded by the public purse to pursue medals but people who arrange their own funding to pursue their own excellence — and fails to come home with a bag-full of gold, silver and bronze? The world will not topple from its foundations because we don’t play the drug game with the Chinese, the Americans, the Russians, and all the rest.

Do we need to drop billions into Industry Canada and its affiliated agencies to dispense as largesse across the country? Do we need to turn people into courtiers for a dollop of money from the regional economic expansion agencies? Do we need to fund ever more police-state-like tribunals, status-granting agencies and their kin? I say: you want money, there’s lots of it hiding here. Shut them down and use the cash elsewhere.

Indeed, even on a good day 20¢ out of every $1.00 sent to Ottawa goes into paying the people who administer and deliver programmes. Every programme that is terminated outright — delivery stopped, delivery and administration and policy staff removed from the public payroll, money reclaimed from the relevant spending envelope — generates less spending on overhead. Turn that money back to those of us whose property it is and it’s worth $1.20 per dollar in our pockets.

After all, my overhead, and your overhead, to find ways to do these things (if they matter to us) is far, far less than 20%. Don’t believe me? Ask what the overhead for the child care payments is versus what the overhead would have been for “national day care”. (Check Québec’s experience to determine this.)

There are those, of course, who would say that some “vital interest” or other would be starved or left undone if this type of thinking became pervasive. Sorry, I’m not buying it. Take a look at old Hong Kong, with its 15% government take (compare that to the numbers on your tax return, since April 30 is but two days away!) — an incredibly prosperous community that, somehow, managed just fine (before the Peoples’ Republic regained control in 1997, at any rate). The old Hong Kong colonial government set priorities based on its means, which were kept low (short on resources that could be sold off to close the gap, they were acutely aware that money in the hands of Hong Kong’s citizens was the only economic asset the city had.

Of course, the notion that I might tend to my own affairs and have to be responsible for my own decisions scares so many people, who would prefer to be coddled, cradle-to-grave, no matter what the cost in lost opportunity. But here’s the thing: the standard of living in real terms — not the nominal terms of ever-less-valuable fiat currency systematically ruined by governments and central banks around the world — stopped growing in 1973, right when “stagflation” first reared its ugly head. If the long boom of 1982-2007 couldn’t deliver a real improvement in standards of living (for, remember, in 1973 most families were single-income, drove new vehicles that they paid for in three years or less, had mortgages of 25 year amortization or less, were eating better [more imported food, more and better cuts of meat] — compare that to today’s situation), then this next lengthy period of downturn will eat further into Canadian standards of living.

We will all be much poorer, in other words. Stop taking so much of our money!

Remember, those of you who say that without high taxation — and for the middle class no G-7 country hits its pocketbook harder than Canada, its provinces and municipalities do — no great visionary programmes to build the country or relieve suffering could be undertaken, that when Canada was a brand new nation it took on the building of a transcontinental rail line, on a Federal Government tax and tariff base that amounted to 3±1%! (Provinces barely had budgets compared to today: all those Section 92 responsibilities were provincial in large measure because the public looked after them themselves.)

So we can afford grand infrastructure. We can afford our social safety net, too (but we have to be willing to entertain some hard truths about its costs, and how we deal with demand in an era of restrained supply of funds). We simply need to make choices.

In the first paragraph I decried the Harper Government’s failure in this arena. To those who believe, as Tom Flanagan (judging from his piece in the Globe and Mail last fall), that triangulation to the left is how Conservative majorities will be elected, what Harper & Co. have done is not a failure, but a successful positioning for future power. The skirmishes erupting on various blogs between those who hold to “my party, right or wrong” and those who expected better from a Conservative Government indicate the depth of disagreement that is emerging around this.

So, let’s force the issue. My word to any politician who bangs on my (virtual) door? “We want you cut to 20% maximum. Now, do your job within that.” (The Netherlands has a system like this: on your tax return, if the total of all taxes paid to all levels of government, including VAT, plus fees and charges to all agencies, exceeds 67.5% of your income, you cap your tax so that you do not pay (in total) more than 67.5%. The number is horrendously high — which explains much about the Dutch economy’s structural issues — but the idea is sound.)

With such a cap, parties would be forced to campaign in one of two ways. First, to adjust the cap itself — which makes the “the Government graciously allows you to keep this much this year” crowd stand up and be counted. The second is to prioritise, focus, and make programmes work — because there isn’t enough to do otherwise.

The parties would start to differ on what they would do within a limit rather than being able to simply promise, promise, promise. All that extra money in the hands of Canadians would deal with stagflation — and provide resources for entrepreneurial activity to create a 21st century economy in this country “from the ground up”, not from the “successful grant application downward”.

Not that I’m religious, but even the Deity didn’t ask for a tithe beyond 10%. I’ll grant a transitional 20% as we have a nation of recovering addicts — people who think there really is “something for nothing” — who need to go through detox for a few years. But even at 20%, we’d finally fulfil Laurier’s “the twentieth century belongs to Canada”. A century late, perhaps, but certainly on a sustainable foundation (which depending on rising commodity prices due to supply shortfalls globally isn’t).

I’ve chosen the Canada I want to see, the BC I want to see, the Vancouver I want to see. Now: who wants my support? For the price tag of failing to ultimately come to grips with this is that people like me up and leave rather than pay, pay, pay. (After all, were I to go abroad again, it would be for the third — and last — time, and this time I would be looking to take out citizenship where I land.)

Where do you stand?

The Immigration Debate

Once upon a time, almost all of our family lines weren’t here in North America. Of course, going back far enough — and anthropologists, climatologists and geologists believe we don’t need more than 12,000-14,000 years (17,000 at the outside and only for Alaska) to be able to say none of us were here. Human settlement of the Americas is just not that old.

So we are immigrants, and, granting the First Nations their pride of place (I’m not sure how many years of continued residence are required to make someone autochthonous, but the majority of us are measured in decades to a few centuries, not in millennia, so let’s just call the First Nations “here long enough” and be done with it) as the original peoples of this continent, only the oldest of European lines and settlements have been here long enough to possibly be verging on the “native” by historical terms — a St. John’s, say, or a Québec, or an Annapolis Royal, or, south of the border, a St-Augustine or Jamestown (the only two settlements approaching the same age as the Canadian ones). [Please leave L’Anse-aux-Meadows and Roanoke Island out of the discussion: continuity matters.]

Those of us born here — especially those of us of blood lines that go back a few generations in this land — have nowhere else to call home, of course. This shows up the dreadful ambiguity of the whole “immigrant” versus “native” discussion: it all depends on timescale. To my mind, one key question is the culture which is built. The Québec profond of the pur laine is certainly an indigenous culture now — but when precisely did it become so, as opposed to just a settler colony? So, too, the original culture of Southern Ontario — still seen in its Clear Grit southwestern and hardscrabble Tory eastern forms (alas, as George Grant noted, the Golden Horseshoe in the middle gave that culture up in the 1950s) — once American settlers with a Celtic overlay from UK & Irish immigration, but now a culture (and an accent) found nowhere else. Add the Acadians, the Newfoundlanders, and a host of others to the list … this is the Canada we know.

Since 1966 Canadian immigration policy first changed to be open to the whole world, and not just Europeans, Americans and other British settler colonies, and then, starting first with the Mulroney Government and as extended and modified through the Chrétien, Martin and now Harper years, a means of doing two radically dissimilar things: extended family reunification, and attracting skilled people to this country using a points-based system that is being increasingly copied around the world today. This has changed the face, and culture, of Canada in its major urban centres.

Having grown up in Toronto while it changed from being a pseudo-Victorian outpost of the Orange Order to what UNESCO called “the world’s most multi-cultural city”, and now living in Vancouver, which has cities in its regional fabric that are majority immigrant communities, I must say that I am not only used to the glorious mosaic that this can create, but find places without it a tad on the boring side. (Perhaps this is why, in the United States, I prefer New York, and why in Europe I prefer London, and found Sydney in Australia quite congenial: they “felt like home”.) We are richer for this mix, added to the mosaic of indigenous cultures that were Canada already.

The Harper Government’s latest Immigration changes come with the good and the bad. The good part is that the Ministerial discretion being sought is designed to allow us to capture the specific types of skilled people currently in demand in Canada and accelerate their applications up the queue and into the country. This is a good thing. We do not want to become, as the United States with its Homeland Security attitudes and anti-skilled worker (consider the restrictions on H-1B visas [and the mandated H-4 status for spouses that exclude them from even unpaid volunteer work] currently in effect) approaches has, a country headed into (in the words of The Economist) an “Idiotocracy”. Nor do we want to lose the best available immigrants to other countries: these are a key part of our future prosperity. If you want a comfortable retirement, you should be pro-immigrant.

Which, when it comes to skilled immigrants and immediate family members, I am. I am less so in the other part of the category: extended family reunification. Here’s why.

In the nineteenth century, when immigrants came to this country, landing in either Halifax or Montréal and riding the Intercolonial, the Grand Trunk or the Canadian Pacific to their new homes, it was effectively a one-way trip. Almost none of them would ever go back to their ancestral homes. Other family members — brothers, sisters, parents, cousins, etc. — were accessible by slow and infrequent mailings at best. (In my own grandfather’s case, an infant immigrant in 1912, it was the last time he would have contact with his own elder brother or father or any other extended family member until World War II took him to the UK and he was able to use a leave to go to Scotland and research lost relatives.) The decision to emigrate was the decision to start a new life.

Today, of course, cheap air travel has made the world much smaller. (I have one friend, himself a childhood immigrant to Canada, whose parents make an annual trip back to their ancestral community to visit “the other part of the family”. We are fortunate to live in this brief period when the remaining cheap energy makes it easy to travel in this way.) One needn’t make a one-way trip: it is possible to return for weddings, funerals, even births, and still live in a new land. (As I learned myself last fall, travelling across this country — 4,492 km by road, or a little farther than the distance overland from London, England to Baghdad, Iraq — we can go for the dying and funeral of a family member and think nothing of the distances involved when travelling domestically: Vancouver to Toronto is nothing; London to Baghdad would be a great journey, indeed.)

As a result, extended family reunification ought to be a very secondary goal of our immigration policy, indeed. Often, these extended family members do not end up contributing much to Canada relatively speaking: we end up (a mutual pact of ignorance) putting them in a language and cultural ghetto of compatriots “from the old country”. Yet often this has been the implicit priority of our immigration system. The Harper Government is right to try and change it.

What is just plain awful about the proposed changes, of course, is the further concentration of power in the centre that it brings with it. I can accept that this time for a while, I believe, but I am not happy about it. (I’d much rather an honest accounting of what we need to do on the immigration file.)

Finally, there’s the missing element. The professional and learned societies, and the provincial licensing boards, need to be informed in no uncertain terms that if they are unprepared to move speedily and expeditiously to (a) recognise the credentials an immigrant brings, (b) handle such upgrading in as minimal a manner as is required [i.e. individual requirements, not wholesale credential re-acquisition], (c) license these immigrants to practice their professions, and (d) accept them into the field of practice [i.e. hospital privileges, join the firm, recognise tenure, etc.] then the Government will modify the terms of their Charters to “make it so”. It is perverse in the extreme that we work to acquire the best possible new Canadians only to introduce them to the joys of late night taxi driving and other forms of work that do not allow them to use the credentials and skills that gave them the points to come to Canada in the first place.

We need our immigrants: we need them to augment our own workforce, and to continue to build Canadian prosperity. We should want them to add to the tapestry that is Canadian culture, joining in and enriching it. We don’t need to turn the immigrant into a pauper. We also don’t need to eat into our own social services by creating an immigrant underclass through poor prospects and poor subsequent selections.

Perhaps if the Liberals were talking like that I’d be more inclined to see their huffery and puffery about the Immigration provisions as real, as opposed to simple posturing for votes.

A Sense of Decline and Fall?

Having been away for a few days in the southern United States has given me an opportunity to get a feel, on the ground, so to speak, as to whether the US truly is in economic distress or not. This is a subject about which there are conflicting opinions (as, indeed, there are conflicting opinions about whether and to what extent will Canada be affected).

I shall start by being quite clear on one point: I went convinced that the US had passed a tipping point last fall, and that the question was not whether years of economic mismanagement were going to have their revenge, but when and how deeply. Much of my examination, therefore, was done with a conscious attempt not to read too much into what I observed, to try, so to speak, to take the contrarian view and look for the bright side rather than confirm my own down side view.

I was at a conference this week which attracted the bulk of its attendees from across the United States — along with a few Canadians and a handful of people from Europe. First of all, attendance was off relative to prior sessions (this is a twice-a-year event). While the conference organizers tried to paint a positive picture, my crowd estimate is that attendance was down more than 33% from October. Normally, too, the audience tends to bias to the eastern half of the continent at the spring session (held in the east) and to the west in the fall session. Major sections of the east — mostly in the industrial belt, what Joel Garreau, in his 1981 book The Nine Nations of North America called “The Foundry” — were thin in terms of attendees. “Local” attendees — those who could have driven to the event to avoid the cost of flying — were practically non-existent. This is a radically-different profile from previous conferences of all types that I have attended in the Orlando area, as “taking the family” to an event there when you live in the south-eastern US is almost de rigeur.

The tollway from the airport to the hotel facility — this time, at the Universal complex rather than at Disney — doesn’t give one much opportunity to see the state of residential real estate. I was here just a year ago, however, when the billboards were filled with real estate ads: this time, nary a one was seen. Condo developments near highway I-4 were advertising rentals, rather than purchases (and I believe this walled and gated community was advertising as much holiday rentals as long-term ones). There is much unfinished construction, and no sign of continuing work.

Prices everywhere were up from a year ago. Diesel, for instance, is over US$4.00 per US gallon — about CAD 1.06 per litre. Regular petrols ranged between US$3.50 and $$3.70. Yes, they’re still cheaper than in Canada (and especially in Vancouver, which is consistently above the CAD 1.20/litre mark these day) but the differential has dramatically closed: Florida has always been relatively inexpensive, as it is quite close to the heart of the refining base (unlike, say, California). Such food prices as I was able to glean from the local newspaper and television advertising indicate 20% jumps from a year ago for the basics.

The attendees at the conference were glum — morose, even. Few felt that their companies would be doing much this year; many asked me for my thoughts on how to defend their budgets and staff base. There was a general feeling that harder times lay in their companies’ futures. Many capital projects had been cancelled or deferred. Many had had their contractors and consultants quietly purged and removed from the office. More than once I heard people say “thank goodness this was booked months ago, along with a non-refundable air ticket, or I wouldn’t be here”.

Local advertising was mostly for solicitors, especially to deal with foreclosure and to provide relief from dunning by creditors.

A friend of mine in Vancouver asked if (following up on some reading she had been doing) organizations like Starbucks were suffering more deeply than most. The lineup at Starbucks at both Vancouver and Toronto airports was its usual long self, with a full complement of serving staff to keep up with the demand. On the other hand, this morning, the airside (where no worries about liquids would be involved) Starbucks in the busier terminal at Orlando Airport had no lineup at all, and a skeleton (and obviously not well trained) staff. Having had an efficient and even relatively pleasant TSA experience, I had the time, so I sat where I could watch the outlet for about thirty minutes. Only one other person bought anything there during the entire time. Burger King coffee, on the other hand, was a much better seller (although not necessarily a better experience). Apparently people are cutting back.

I think there’s little doubt that Canada will experience some of the same experience over the next while: there are Canadian regions that have also experienced a housing bubble (no area can long sustain housing prices that require 70% or more of a two income family’s monthly net pay simply to pay the mortgage on the most generous [minimal down payment of 5%, 40 year amortization, lowest variable interest rate], as does Vancouver today). Garth Turner’s new book — based more generally in the Toronto region experience, which is equally overpriced — suggests the bubble is being burst this year. I concur. The adjustment — having lived through Connecticut eight years after its last housing bubble, where a 50% “adjustment to reality” was still required to awaken the local market — can be long and difficult, especially as real estate generally needn’t move.

For all that, we have done many things right. The West is unlikely to experience a slowdown (save only if the Bank of Canada does something really stupid and follows the Federal Reserve into the abyss of negative real interest rates). Central Canada has some adjustments, but these are as much due to the drying up of business on the US side of the border — work-out specialists from New York fill flights to Michigan, for instance, to restructure the extended automobile sector — as to the border shenanigans associated with the Department of Homeland Security’s flouting of the principles of NAFTA, to which the US was a willing signatory and remains a general beneficiary.

The Bank of Canada must resist the siren call to lower our interest rates: we do not need it for our domestic purposes, and indeed it would simply start an economic fire that would worsen our competitiveness for the future. (We must also, it goes without saying, eschew the “quick fix” handout mentality from the Opposition benches, from the Turners in the Liberal camp to the NDP at large.) On CNBC this morning the Bank of England was applauded by the stock junkies for having lowered rates “to help the United States” (the myopia of the US media continues unabated) and the European Central Bank was criticised for being “more concerned with European needs than ‘our’ needs”. Jean-Claude Trichet and his fellow ECB governors are to be applauded for paying attention to the people they are there to serve, and so, too, our central bank should do the same.

All in all, I come away thinking that the US had quite a bit further to fall. Until the hubris that leads to calls for others to suffer to “bail out” the US abate and Americans take responsibility for the shape they’re in — no one I talked to felt there was any connection between their own deficits, or their quest for endless growth, or their quest for a risk-free life and the conditions they are now experiencing — this downturn will continue to unfold. Only if we see responsibility being accepted, south of the border, should Canadians consider lending a hand. Certainly none of the candidates campaigning for office there show any sign of understanding how much bad policy exists, and how much they are espousing. In short, sauve qui peut — we should tend to our own health and well-being.