Thursday, January 02, 2014

Fiscal Fever

Earlier this week, Paul Krugman wrote that -- in the United States, at least -- the fiscal fever has broken:

So the good news is that this fever, unlike the fever of the Tea Party, has finally broken.

True, the fiscal scolds are still out there, and still getting worshipful treatment from some news organizations. As the Columbia Journalism Review recently noted, many reporters retain the habit of “treating deficit-cutting as a non-ideological objective while portraying other points of view as partisan or political.” But the scolds are no longer able to define the bounds of respectable opinion.

In Canada, unfortunately, the scolds are still in power. All that matters is the deficit. Scott Clark and Peter Devries review Canada's recent economic performance:

The year 2013 has not been a good year for economic growth and job creation in Canada. In fact the economy has not been doing well for some time. We’ve been in a growth decline since 2010 and job creation has been dismal since then. In 2009, real GDP declined by 2.9 per cent and then bounced back in 2010 to 3.3 per cent. Since then, growth has been slowing: to 2.4 per cent in 2011; to 1.7 per cent in 2012; and to a forecast rate of around 1.6 per cent in 2013.

At the G8 summit in 2010, Stephen Harper pushed hard for a global dose of austerity, siding with Carmen Rinehart and Kenneth Rogoff, who claimed that government debt has severe negative effects on growth when it exceeds 90 percent of G.D.P.  Krugrman writes:

From the beginning, many economists expressed skepticism about this claim. In particular, it seemed immediately obvious that slow growth often causes high debt, not the other way around — as has surely been the case, for example, in both Japan and Italy. But in political circles the 90 percent claim nonetheless became gospel.

Then Thomas Herndon, a graduate student at the University of Massachusetts, reworked the data, and found that the apparent cliff at 90 percent disappeared once you corrected a minor error and added a few more data points. 

That news never penetrated the Conservative bunker. Harper and Flaherty are focused on the deficit -- employment be damned:

In February 2008, the unemployment rate hit a low of 5.9 per cent. In November 2013 it was 6.9 per cent. In February 2008, the labour force participation rate hit a high of 67.8 per cent; in November 2013, it had fallen to 66.5 per cent, clearly indicating that many Canadians had simply withdrawn from the the job market because of a lack of opportunities. It also means that the ‘real’ unemployment rate, which includes discouraged workers, is much higher than 6.9 per cent.

In February 2008, the ratio of working Canadians aged 15 and over to the population aged 15 and over (referred to as the employment rate) reached a high of 63.8 per cent; by November 2013, it had fallen to 61.7 per cent. In other words, the economy is just not growing fast enough to create enough jobs for a growing working-age population. The youth unemployment rate remains stubbornly and unacceptably high.

Austerity -- Mr. Harper's prescription for world economic health -- has been a disaster. The rest of the world has come to that conclusion. But, in Canada, the fever still rages.


The Mound of Sound said...

Owen, this is a petro-state. That is not a labour-intensive industry. It is, however, a high-wage labour sector, something Harper intends to rectify by re-opening the floodgates of guest workers just as soon as we drop our guard again.

Nothing will be allowed to intrude on the prime directive, moving bitumen to tidewater, not labour, not the environment, not the public will.

As for the non-petroleum sectors, it's austerity for them and devil take the hindmost. And the devil, in case they have the misfortune to work in a federally-regulated sector, is the collective-bargaining crusher, Harper himself.

Lorne said...

Shining the light in order to pierce the Tory mythology regarding their handling of the economy is crucial if we are to ever oust this sad excuse for a government, Owen.

Please check out my latest blog entry, as you were one of the people I was thinking of when I wrote it.

Anonymous said...

Harper is bringing thousands of foreigners, to take our Canadian resource jobs. The more of Harper's foreigners are trained? More and more Canadians will be laid off. This is already going on.

We trust Harper's inspectors, policing foreigners taking Canadian jobs, as much as we believed Harper's stacked panel, on the Enbridge pipeline.

Harper's economic and job action plans? Never made it off the billboard of, Hockey Night in Canada.

Owen Gray said...

Harper's talk about jobs is like talking about the weather, Anon. He talks about the problem. But he doesn't do anything about it.

Owen Gray said...

Change begins with each of us, Lorne. But we must summon our courage to change. I'm including a link to your blog:

Owen Gray said...

As you pointed out in a post today, Mound, Harper is decimating the middle class -- which means he is sending our children's future into the dumpster.

Any real economist knows that a nation's future depends on its middle class. But Stephen Harper is no economist.

e.a.f. said...

Steven Harper is yesterday's man. He himself was not one of the 1%ers, but they have convinced him to do their bidding.

There aren't enough jobs in Canada. Bringing in foreign workers is simply an attempt to force Canadian to work for lower wages and break unions. There is enough money in the world for things to be better but the 1%ers of the 1%ers aren't going to let it go.

Government can't do everything. However, corporations are doing nothing, except accumulating more money. As they accumulate, others loose. Its that simply. At the rate things are going workers lives will start to look like those in 3rd world countries. If you look back 100 yrs you will see what the capitalist elites would like North America to look like again.

Owen Gray said...

Your point about looking back one hundred years is important, e.a.f. Harper's vision is straight out of the 19th century.

He would be happy if he could turn back the clock.