Category Archives: Uncategorized

The Latest Senate Outrage

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The Senate last week voted to amend Bill C-377, legislation passed by Members of Parliament that would compel labour unions to disclose their salaries and expenses. For many, the bill represented a welcome move to financial transparency. For others, there was no lack of irony in the Senate’s move considering the recent spectacle over the abuse of expenses by a number of senators.

But as Andrew Coyle correctly argues, the Senate’s actions to amend C-377 are completely wrong, stating that “it is intolerable that that power should be exercised by any but those the people choose.

The 18th Century Irish statesman and philosopher Edmund Burke asserted that parliament was not a congress of advocates of competing interests, but a deliberative assembly seeking to identify a common interest.

The Senate is neither of these institutions. Instead, it is a community of political partisans unaccountable to Canadian citizens whose actions are an affront to political legitimacy.

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We Need an Education And Training Revolution

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In an important way, the purported skills shortage reflects complacency, as well as the short-sighted economics of Canada’s corporate sector. In sectors as disparate as manufacturing, oil and gas, financial services, information technology and tourism, Canadian companies eschewed investments in innovation and productivity improvements while gradually allowing total compensation to decline against their American counterparts. Today, many Canadian firms struggle to be globally competitive. The affordability of labour is the cornerstone of this dynamic.

Published in the Telegraph-Journal 30th April 2013

The scandal around the use of temporary foreign workers by some firms in Canada has re-opened the discussion about what’s causing a shortage of workers in industries across the country. And it has raised questions about whether there is a skills mismatch or even if there is the kind of shortage that cannot be addressed by conventional means.

Speaking to the Commons finance committee for the last time before his departure for London in June, Bank of Canada governor Mark Carney said that there are shortages of some skilled trades but pointed out that Canada has one of the most flexible labour markets in terms of mobility among advanced countries.

The problem of unemployment is most acute in places with rigid labour markets. Countries with limited mobility of labour, high taxes on hiring, too-strict rules about firing and high minimum wages have some of the highest unemployment in the world. In some countries, cartelized industries, powerful trade unions and complex regulatory regimes on work and compensation conspire to keep unemployment high. But one would need to very heavily massage the data to view Canada as one of these countries.

“There are some signs of skills miss-matches (but) we do believe employers play an important role to ensure life-long skills development is a part of the nature of business in Canada,” Carney told the finance committee. He argued against increased reliance on the controversial temporary foreign workers program. He stated that the program was more suitable for temporary shortages of high-skilled workers than service jobs and other lower-wage categories that critics claim are now being filled by foreign imports.

He argued that if there is a shortage of workers to fill unskilled, low-paying jobs, it is important to allow the market and wages to adjust over a reasonable timeframe rather than try to solve the problem by bringing in foreign workers. The solution to that problem, said Carney, is for employers not only to “make sure Canadians are paid higher wages, but also that the firms improve their productivity.”

This solution is particularly challenging for firms in Atlantic Canada which have long relied on paying workers lower wages and benefits compared with their counterparts in the rest of Canada. Over time, this wage differential has become integrated into the operating cost structure of many companies who leveraged that differential to avoid improvements in productivity or investments in innovation.

Deregulating labour markets even further may be required to successfully address worker shortages and ease unemployment. But it will not be enough on its own. There are examples of where more innovative approaches have paid dividends. Countries which have better skills matching and unemployment records tend to be more activist, helping to find jobs for those who are struggling. Germany pays a proportion of the wages of long-term unemployed workers for the first two years. It has the second-lowest level of youth unemployment in the developed world. The Scandinavian countries provide young people with individualized plans to integrate them into employment or training programs. These approaches can be usefully tailored and adopted by Canadian jurisdictions.

The broader solution lies in starting in the right place. Technology is helping democratize education and training but only among the literate. The root of the competitiveness challenges that plagues Atlantic Canada is the persistently low levels of literacy across the region. What is needed is an education and training revolution that is appropriate to the scope and scale of the problem beginning with a thoroughgoing multi-generational commitment to eradicating illiteracy. What is needed is a dramatic expansion of the study of science and technology and closing the gap between education and the needs of the workplace. And what is needed is a generous investment — by government and industry — to upgrade vocational and technical education and to substantially expand apprenticeships. The clear implication of such an approach is that it is necessary for firms and educational institutions to forge closer relationships with each other. This would require a change of attitude that is long overdue.

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Job Creation is a Two-Part Challenge

Published in the Telegraph-Journal 2nd November 2012

It has been five years since the financial crisis began to unfold. The global economy has yet to recover and governments in Europe continue to fail. People in countries around the world have been asking where jobs and growth will come from. They are losing patience as the political solutions that appear to have worked in the past seem to be wholly inadequate to the task. The revolution may not yet have come to politics, but it may already have arrived in economics.

Political leaders could once have counted on government to kick-start the economy into growth. Tax reform and investments in education, roads and infrastructure arguably are good ideas and are necessary. But these measures in themselves will not resolve the deepest and most intractable unemployment problem that the world has faced since the Great Depression of the 1930s.

In Brussels, a recent European Union summit on growth and jobs featured an agenda focused on familiar public policy goals:  infrastructure investment, broadening the single market, promoting research and innovation, enhancing manufacturing competitiveness, establishing the correct regulatory framework, developing a tax policy for growth and harnessing the potential for trade. The summit also featured a special discussion spotlighting potential measures to boost employment and social inclusion and adopting initiatives to tackle youth unemployment.

These are praiseworthy goals, as are Obama’s job growth objectives in the run-up to the November elections, but these goals and objectives reflect policies that Europe and the U.S. have been attempting to implement for the past four years. In that period, European unemployment has risen steadily and the U.S. economy remains mired in uncertainty and flat growth. Why should government fiscal stimulus suddenly address the anxiety over the need for jobs when it apparently has failed to do so for more than four years?

The answer for fiscal conservatives is that the failure of the economy to respond adequately to fiscal stimulus, mostly in the form of various quantitative easing measures, is a clear indication that even the concept of government intervention has been a failure.

The reality is that there are two separate foundations for economic growth and job creation. New job creation and economic activity depends largely on the private sector where the key role of government is deregulation and public expenditure reduction. It is still not clear how much government policy can do to inspire the creation of the Next Big Thing, even under ideal conditions.

Restoring jobs lost by firms in industries that have lost their global competitiveness is important as creating new jobs in new industries. In Canada, some of the firms that have experienced challenges in recent years are in the natural resources sector where a combination of factors — foreign competitors’ lower costs, foreign government subsidies and a Canadian dollar that recently has risen in value from 65 cents — has conspired to place real pressures on many of these companies.

Since 2008, more jobs have been lost in manufacturing and other traditional industries. These jobs did not disappear because of inadequate corporate strategies, poor planning or lack of financial controls. They vanished primarily because of weakened housing demand in the U.S., a collapse in consumer incomes, falling asset prices and other elements of macroeconomic instability and disruption. These jobs will not return because of deregulation and government cost-cutting.

While job creation is associated with deregulation, job recovery depends on the supportive actions of government and jobs may not return to the same companies or even the same industries. The purpose of macroeconomic stimulus is to pull the economy out of recession and preserve jobs in existing industries, which in turn helps to strengthen new businesses. While the economy remains weak, excessive reductions in government spending will serve only to deprive new business of revenues. For government to receive support for public policy, the public must be aware of these apparent contradictions.

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Electric Cars Are Here But We Might Not Be Ready For Them

By Peter Lindfield, published in the Telegraph-Journal 7th September 2012

Are we ready for electric cars? After a number of false starts, they’re now available for sale in North America – the Nissan Leaf, the Mitsubishi i MiEV and the Ford Focus Electric are members of a growing roster of electric-only vehicles produced by major auto manufacturers. They join hybrid vehicles such as the Toyota Prius, which hedge their bets by having both gasoline and electric propulsion.

Pure electric vehicles and hybrids are popular, at least in principle, because compared with conventional internal combustion engine automobiles, electric vehicles have the key benefit of significantly reducing local air pollution.

But are electric cars ready to replace their gasoline- or diesel-powered counterparts? And are we ready to transition to vehicles that will require a substantial and expensive support structure to sustain? The answer to both questions is a resounding no.

Electric cars are not ready for prime time. Despite their potential benefits, the pervasive use of electric cars faces several hurdles and limitations. The future of electric vehicles ultimately will depend on the cost and availability of batteries with much higher specific energy, power density and longevity than is the case today.

The cost of their lithium-ion battery packs adds $4,000 or more to each vehicle, requiring many miles of operation before that cost can be recouped in conventional fuel savings. If history is any indication, many owners will have traded in their car before achieving break-even.

Driving on battery power won’t take you far either. Most electric cars can travel less than 300 kilometres before needing to be recharged, which can require six hours or longer. The expression “range anxiety” figures prominently in their drivers’ lexicon. The operating range of conventional internal combustion engine vehicles now routinely exceeds 1,000 km; you will need to stop for other reasons before the fuel runs out. The technology infrastructure is still only minimally equipped to support millions of charging stations. The network of residential, commercial and government facilities to recharge electric vehicles won’t be an inexpensive proposition.

And since electric vehicles need to be recharged, the reduction of greenhouse gas emissions at the point of operation doesn’t necessarily mean a free ride. Electric power needs to be generated at power plants that may burn coal or oil. In many regions, the limited availability of sufficient electric power may present problems.

Across Canada, many power generating plants already operate at peak capacity at least part of the time, and adding additional capacity to manage the draw of electric vehicles will require the rethinking of power grids and power usage patterns. Admittedly, many electric car owners will recharge their vehicles at night when load requirements are lower, but we don’t yet have a clear understanding of the implications of the added cost and how it will be borne.

Currently, big-money support for the transition to electric vehicles is a two-nation race. The U.S. and China have independently established policies and economic incentives to overcome existing barriers to fund more cost-effective battery technology and the further development of electric vehicles. The U.S. government has committed $2.4 billion in federal grants to fund the development of electric cars and batteries.

Electric vehicles would also lessen American dependence on foreign oil and directly address the ongoing American concern about vulnerability to oil price volatility and supply disruption. China recently announced it will provide funding of $15 billion to initiate the development of a competitive electric car industry.

The era of the conventional internal combustion engine isn’t quite over.

Innovations such as electronic engine management and advanced materials and assembly methods will mean that internal combustion engines will achieve increasingly better fuel economy even as more stringent emissions standards are applied. The application of innovation and technology may extend the lifespan of these engines for another 20 years.

Even so, the gasoline or diesel powered vehicles’ days are numbered, and the development of an efficient, cost-effective battery will change the world. Most communities across Canada are wholly unprepared for the eventual changes that electric vehicles will bring.

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On the Path to a More Cohesive Province

By Peter Lindfield, published in the Telegraph-Journal 27th July 2012

As Canada’s Council of the Federation meetings convene in Halifax in the waning days of July, the economic news from the rest of the world is grim. In the U.S., consistently weak industry performance has defied analysts’ more rosy forecasts. An electoral crisis in Greece, a banking crisis in Spain and Portugal, and a bitterly fought election in France have all taken place within the previous months. Canada has not been spared. The unemployment that remains stubbornly high in some provinces is emblematic of a growing regional disparity. And the commentary about the world’s economic problems, with dire predictions of further unemployment, defaults, and recession would appear to set the stage for pessimism at the meetings.

At the Council meetings, there are the usual and expected complaints about federal government’s lack of commitment to provincial concerns. But we are also hearing measured optimism and a continued focus on Canadian competitiveness. And we are hearing this from Canada’s business sector.

This expression of confidence comes from a business community that customarily is disinclined to support government while being prone to complain about excessive government regulation and meddling. This perspective is also in contradistinction with the views of much of the business media which is more content to report the bad news. So it appears that, despite the uncertainties that the 2007-2009 financial crisis and subsequent recession have exposed in contemporary capitalism, a substantial number of business leaders neither want the current system to break apart nor think that its fragmentation is inevitable.

Canadian business leaders do want transformation. They believe in radical political and economic changes that support competitiveness and promote greater centralization in governance structures. They believe that transformative change will encourage the recovery and the capacity to generate growth and prosperity. They also believe that this capacity is not distributed equally across Canada.

In New Brunswick, who really wants transformational political and economic change? Judging by the array of opposition to new thinking in health care, pension reform, education, energy, municipal governance, natural resource management and fiscal stabilization, the answer is very few want any change at all. Nova Scotia businessman John Risley expressed it succinctly when he said that “Atlantic Canadians don’t like change and want the world to leave them alone”. Mainstream, status quo thinking has made it more difficult for political parties to support the needed changes to institutions, regulations and laws to keep up in an increasingly fast-moving world.

The 2007-2009 financial crisis has made the world even faster moving. But at the same time, the recent impact of the crisis has been to raise the need for and the intensity of proposals for reform, even in New Brunswick. There is an enormous push building for reconciling pension practices. The goal of a more rational approach to municipal governance, which has been stalled for decades by fruitless negotiation, now stands a chance of succeeding. Major changes in health care, education and social service delivery are now at least on a discussion agenda. Looming in the background is the specter of government’s growing debt. To say that the debt constrains our choices is an ambitious understatement. Very few voluntary changes will be possible if government’s deficits and debt are not brought to heel.

Crises arise because critical questions are inadequately addressed. Viewed in this way, the current fiscal crisis in New Brunswick should be welcomed as the catalyst it is. It will force leaders and the public to closely examine the transformative measures and reforms that have been resisted, held back or postponed for years. Whatever one may think about the current challenges, or the discussions they have fostered, the consequences of future efforts should be a stronger, more cohesive New Brunswick, not a lesser, weaker one.

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Euro Crises put Contemporary Capitalism at a Crossroads

By Peter Lindfield, published in the Telegraph-Journal 12th June 2012

Contemporary European capitalism has had a relatively short run. It combines generous health and social benefits with shorter working hours than in North America and an emphasis on long vacations and early retirement. With high levels of productivity and income distributions that avoid excessive inequality, the European model of capitalism would appear to be the ideal balance of competitiveness and social stability.

In a post-financial crisis world, the possibility of fiscal meltdown in Greece, Spain, Portugal and Italy has become frighteningly real. We have come to question the sustainability of the European model. But the failure of these economies in conjunction with an extended global recession has cast a long shadow on the future of capitalism itself.

Successive versions of capitalism have been extraordinarily successful for more than two hundred years since the beginning of the Industrial Revolution. The dismal poverty that is still prominent in some parts of the world has been all but banished in much of the West. This is in stark contrast to the catastrophic experience of Marxist and socialist states, especially in the twentieth century. Today there is no agreement on what a viable replacement for the contemporary Anglo-American paradigm would look like.

A more state-centric variant of capitalism exists in China, where industrialization and massive investments in technology have transformed that country in less than thirty years. The Chinese capitalist model features ferocious competition among export firms, and government intervention is widespread and pervasive. Its social safety net is substantially weaker than the typical Anglo-American model.

But rather than viewing China’s model as superior to the Anglo-American paradigm, it is important to remember that Chinese political, economic, and financial institutions are still evolving.

In fact, it is the long global successes of capitalism that have thrown a spotlight on the looming structural flaws of the current economic system.

First, we continue to be faced with a widespread financial crisis on a number of fronts. Ongoing, relentless technological innovation has conspicuously increased economic risks where purely market-based solutions appear to be unable to address the global transformation that is taking place.

Financial systems themselves have inadequate regulations, with too little focus on excessive accumulations of debt. A prominent example is health care, where many countries are struggling with the moral dilemma of how to maintain incentives to produce and consume efficiently without producing unacceptably large disparities in access to care. The current pricing of health care does not encourage a more equitable relationship between equality and efficiency.

Second, Western economies have consistently failed to effectively price public goods such as clean air and water. There is little political will to establish a sufficiently high global price for carbon to motivate firms and individuals to internalize the cost of their environmental activities. There is widespread consensus that economics and the environment are inextricably intertwined, but the failure of Western states to conclude global climate change agreements is indicative of this pricing challenge.

Third, capitalism increasingly is producing unacceptable levels of inequality. At sub-national levels, tax systems have failed to provide a greater measure of redistribution of income without creating unnecessary distortions. The growing gap is partly a byproduct of capitalism’s tendency to aggregate at the national level. But it is clear that in many nations, regional disparities are growing, despite some governments’ reliance on equalization systems. We have yet to find the tools to curtail this vicious circle without stunting national growth.

There is no doubt that conventionally measured economic growth with the central implication of higher consumption cannot be sustained as capitalism’s core objective. The challenges of climate change, health care and financial instability are becoming more prominent, while political institutions remain unable to address them. In a few decades, we may look back on this era as the turning point in the history of capitalism.

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Public Still Sceptical About Shale Gas

By Peter Lindfield, published in the Telegraph-Journal 8th June 2012

The Irving Grand Lake Timber sawmill sprawls on the banks of the Salmon River in the centre of the village of Chipman. It employs up to 260 skilled employees and hundreds more in its woodlands operations. Recent upgrades, including a biomass boiler, have reduced the mill’s production costs while making the huge facility more energy efficient and environmentally friendly.

The town appears in many ways locked in an earlier time when many more sawmills across New Brunswick meant good jobs and prosperity for thousands of workers. Except for a small number of modern buildings, such as the sleek new high school, the year could be 1952. Today the Chipman mill is one of the last of its kind.

Chipman was the site of the provincial government’s first in a series of public meetings to discuss its proposed shale gas regulations. Natural Resources Minister Bruce Northrup said that the meetings, to be held in eight communities across New Brunswick until June 25, will provide an opportunity for an in-depth discussion of the proposed measures.

The meeting was held in Chipman’s Community Heritage Centre, a simple two-story brick commercial building constructed as a movie theatre in 1939.

More than an hour before the meeting was scheduled to begin, two RCMP officers had arrived and sat conspicuously in their cruiser across the street. A few people were managing protest signs at the side of the building.

By the time the meeting began, the Heritage Centre had filled to capacity. Two large screens at the front of the room flanked a long desk where Universite de Moncton biologist Louis LaPierre sat facing the crowd. In May, LaPierre had been designated by the provincial government to lead the meetings. More than 100 people had come to hear what the speakers had to say about the regulations that would protect them from the practices of seismic testing and drilling in their neighborhood.

People entering the building were given five documents prepared by the provincial government’s Natural Gas Group. The government had established a Natural Gas Steering Committee in early 2011, directing it to prepare an “Action Plan to ensure that any expansion of the natural gas industry in the Province will take place in a careful and responsible manner.” The Natural Gas Group was composed of experts taken from within government and given the responsibility of developing the Action Plan.

The key discussion documents presented principles for environmental management of shale gas activities and described recommendations for putting the principles into operation. A total of 116 recommendations include 104 short-term recommendations that the Natural Gas Group considers “relevant to the current and anticipated short-term future level of oil and gas activity”.

The meeting presenters focused on a number of potential environmental concerns using nineteen busy PowerPoint slides that drove down to details of the recommendations. The presentation was very measured and appeared calculated to demonstrate that the government group had undertaken an exhaustive review of the risks and challenges associated with the life cycle of shale gas drilling. The government experts who sat with LaPierre at the long table were earnest and knowledgeable in their respective fields.

When the presentation was completed, questions from the floor revealed just how far government and industry will need to go to win the confidence of the public. While each question was posed courteously, it was clear that few were buying the government’s messages. Each remark expressing skepticism about the trustworthiness of the shale gas industry was met by loud applause. One question after another cast doubt on government’s ability to safeguard the environment. The loudest applause was reserved for a questioner’s appeal for a referendum to settle the issue.

The public may not have been supportive in Chipman on this day, but patience, discipline and listening to their concerns will pay sizable dividends. Confidence-building will take time.

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