For the past year and more, the Canadian federal government has been running a shamelessly partisan advertising campaign touting "Canada's Economic Action Plan", a ragbag of policies that have supposedly kept the economy afloat while the rest of the world has been mired in recession. With the next election no more than two years away, yesterday's Throne Speech to open the new session of Parliament unveiled a bit of a change of course: the Tories are going all populist on us.
Truth to tell, it's another ragbag of stuff. The government plans to force cable TV companies to let customers pick and choose the channels they want, rather than having to buy bizarrely "bundled" services that include all sorts of dreck that nobody wants. (For example, if you want something like Bloomberg TV or BBC World, you'll probably find you have to pay for something like Nickelodeon or Homes and Gardens TV as well). Phone companies are to be forced to reduce roaming charges (though there's to be no action against the peculiar pricing regime that requires you to pay for incoming calls and messages on your cell phone). Companies that charge customers extra for paper bills, as opposed to electronic ones, will be required to cease and desist. The government even wants to ensure that Canadians shopping at home pay the same prices that they would pay for the same goods in the US, which frankly seems like a completely unattainable goal.
It's an amazingly interventionist agenda for a government that loudly trumpets its opposition to excessive regulation of the private sector. It's also a real volte face for the Harper Tories: as the opposition NDP has been quick to point out, Harper has consistently voted against any and all such pro-consumer measures that have been suggested in the past.
It's also an agenda that's largely irrelevant to the economy's real problem: inadequate employment. Although it's true that Canada has done better than the rest of the G8 in the last half-decade or so, the job market is in poor shape. The most recent monthly employment data showed rising numbers of young people becoming discouraged about finding work. Stories about unpaid internships fill the media. Increasing numbers of workers in all age groups find themselves unable to find anything other than short-term contract work. Thousands of the notionally "employed", especially in retailing, now have no guaranteed hours of work each week.
These depressing trends have gathered pace even as the ballyhooed "Economic Action Plan" has unfolded. With the government restating its fiscal austerity stance and its determination to eliminate the budget deficit by the time of the next election, there's nothing in the Throne Speech to give the unemployed and underemployed much hope.
Thursday, 17 October 2013
Monday, 14 October 2013
Ruling out all options
In common with a lot of other jurisdictions, the Province of Ontario is moving to phase out the use of coal in power generation. It's also gradually reducing the role of the existing (and aging) fleet of nuclear plants, and reconsidering plans to build new ones. Gas generating plants are still under construction, but not in areas where the power is actually needed: in a long-running scandal, the taxpayer is on the hook for more than a billion dollars in connection with a couple of plants, already under construction, that were moved from the Toronto area ahead of the last provincial election.
Still, that leaves plenty of renewable options, right? Well, not exactly. A big push by the government to increase wind power generation has fallen foul of furious opposition from rural communities that don't want their pristine landscapes scarred by arrays of ugly windmills. Solar power remains far more expensive than conventional alternatives, and can only be considered a partial solution for a country at Canada's latitude. And even hydro power proposals don't seem to be able to make it past the NIMBYs -- see this example from the bucolic Muskoka region.
Which leaves us with what, exactly? Environmentalists argue for conservation rather than generation, pointing to the fact that electricity usage has fallen by 10 percent over the past decade. However, this is largely the result of the virtual collapse of the province's manufacturing base over the same period, so it's not a good thing, and it's certainly not an indication of future trends.
And then there's the possibility of importing power from neighbouring Quebec. Hydro Quebec's generating plants at Baie James are one of the engineering wonders of the world, but for Ontario to rely on them as a base source of power would be fraught with risk. A huge network of transmission lines would be needed to bring the power to Ontario, which would undoubtedly run into massive local opposition. Moreover, as Quebecers themselves discovered back in the 1990s, a major ice storm can bring the lines down and leave whole cities in the cold and dark. Lastly, Hydro Quebec currently sells surplus power into the NEPool in the United States. While this is mostly done under short-term contract, it would seem unwise for Ontario to rely for much of its power on supplies for which it has to compete with other buyers.
A motto of the environmental movement is "think globally, act locally". In the debate over future power generation in Ontario, citizens are both thinking and acting locally because they assume that someone else is taking care of the big picture. You wonder what would happen if the citizens of Bala Falls, Muskoka, for example, were given an honest choice. Something like, "Do you agree to the construction of a hydro generating plant, or do you want to freeze to death next winter?"
Still, that leaves plenty of renewable options, right? Well, not exactly. A big push by the government to increase wind power generation has fallen foul of furious opposition from rural communities that don't want their pristine landscapes scarred by arrays of ugly windmills. Solar power remains far more expensive than conventional alternatives, and can only be considered a partial solution for a country at Canada's latitude. And even hydro power proposals don't seem to be able to make it past the NIMBYs -- see this example from the bucolic Muskoka region.
Which leaves us with what, exactly? Environmentalists argue for conservation rather than generation, pointing to the fact that electricity usage has fallen by 10 percent over the past decade. However, this is largely the result of the virtual collapse of the province's manufacturing base over the same period, so it's not a good thing, and it's certainly not an indication of future trends.
And then there's the possibility of importing power from neighbouring Quebec. Hydro Quebec's generating plants at Baie James are one of the engineering wonders of the world, but for Ontario to rely on them as a base source of power would be fraught with risk. A huge network of transmission lines would be needed to bring the power to Ontario, which would undoubtedly run into massive local opposition. Moreover, as Quebecers themselves discovered back in the 1990s, a major ice storm can bring the lines down and leave whole cities in the cold and dark. Lastly, Hydro Quebec currently sells surplus power into the NEPool in the United States. While this is mostly done under short-term contract, it would seem unwise for Ontario to rely for much of its power on supplies for which it has to compete with other buyers.
A motto of the environmental movement is "think globally, act locally". In the debate over future power generation in Ontario, citizens are both thinking and acting locally because they assume that someone else is taking care of the big picture. You wonder what would happen if the citizens of Bala Falls, Muskoka, for example, were given an honest choice. Something like, "Do you agree to the construction of a hydro generating plant, or do you want to freeze to death next winter?"
Friday, 11 October 2013
Cameron's triumphant giveaway
I see UK Prime Minister David Cameron is crowing over the success of the controversial part-privatization of the Royal Mail.
The share offering was heavily over-subscribed and the shares have jumped well above the offering price in the first day of trading. As a former investment banker, I'd be tempted to say that the offering must have been underpriced, which means that the UK taxpayer has just been royally hosed for the benefit of investors.
Then again, it's unlikely that the interests of taxpayers were topmost in Cameron's mind when he decided to carry out this fire sale -- and it's a reasonable bet that most of the investors are good Tory voters who've just received a nice little bonus at the expense of their fellow citizens. What was Cameron's catchphrase again: oh yes, "we're all in this together".
UPDATE, October 17: Royal Mail shares are now trading almost 50% above the IPO price, which means Cameron's "triumph" has now cost taxpayers almost $1 billion in foregone revenue.
The share offering was heavily over-subscribed and the shares have jumped well above the offering price in the first day of trading. As a former investment banker, I'd be tempted to say that the offering must have been underpriced, which means that the UK taxpayer has just been royally hosed for the benefit of investors.
Then again, it's unlikely that the interests of taxpayers were topmost in Cameron's mind when he decided to carry out this fire sale -- and it's a reasonable bet that most of the investors are good Tory voters who've just received a nice little bonus at the expense of their fellow citizens. What was Cameron's catchphrase again: oh yes, "we're all in this together".
UPDATE, October 17: Royal Mail shares are now trading almost 50% above the IPO price, which means Cameron's "triumph" has now cost taxpayers almost $1 billion in foregone revenue.
Wednesday, 9 October 2013
The least logical tax EVER!
We stayed in a hotel in Toronto for one night this week. At checkout I questioned an unexplained item for just under ten bucks that appeared on the bill, described only as "DMP charge". Turns out that it's one of those almost ubiquitous fees designed to finance the local tourism authority.
Remind me how that works? If you actually show up in the city, which is presumably what the tourism authority is trying to induce you to do, then you get hit with this fee. If you stay the hell away from the place, no fee! How smart is that?
Probably the threat of a ten dollar sneak addition to your hotel bill won't put you off visiting Toronto, but this might: right now the city is all but impossible to get around. Parts of the subway system, such as it is, are closed nights and weekends for essential upgrades. The main train station is being rebuilt. And just about every major road in the city is being dug up.
After years, if not decades, of neglect, the city is trying to fix all its infrastructure at once. The reason? The Pan Am Games are coming to the area in 2015, and the politicians don't want to be embarrassed when delegates from much poorer nations down south realize how badly Toronto manages these things.
I always used to joke about Toronto being a good place to live, but you wouldn't want to visit there. If you are still tempted to go, maybe best to wait until after 2015, when most of the work is finished. Just remember to budget an extra ten bucks for that fee.
Remind me how that works? If you actually show up in the city, which is presumably what the tourism authority is trying to induce you to do, then you get hit with this fee. If you stay the hell away from the place, no fee! How smart is that?
Probably the threat of a ten dollar sneak addition to your hotel bill won't put you off visiting Toronto, but this might: right now the city is all but impossible to get around. Parts of the subway system, such as it is, are closed nights and weekends for essential upgrades. The main train station is being rebuilt. And just about every major road in the city is being dug up.
After years, if not decades, of neglect, the city is trying to fix all its infrastructure at once. The reason? The Pan Am Games are coming to the area in 2015, and the politicians don't want to be embarrassed when delegates from much poorer nations down south realize how badly Toronto manages these things.
I always used to joke about Toronto being a good place to live, but you wouldn't want to visit there. If you are still tempted to go, maybe best to wait until after 2015, when most of the work is finished. Just remember to budget an extra ten bucks for that fee.
Friday, 4 October 2013
Over-determined
The US government shutdown, now rapidly being subsumed into the much more serious wrangle about increasing the debt ceiling, shows no sign of ending any time soon. President Obama clearly regrets allowing the debt ceiling to become the centerpiece of innumerable fiscal disputes in his first term, and is refusing to negotiate on the issue at all. Republicans are determined to use the leverage that they feel the looming US default gives them to drive a hard bargain on the future direction of fiscal policy. "Obamacare", the proximate cause of the shutdown, has faded into the background, as most senior Republicans seem willing to admit that prospects for its repeal are non-existent.
Most economists and media commentators realize that the debt ceiling is far more trouble than it's worth, which is why it's an unknown concept outside the United States. It's likely that most politicians on both sides of the debate (the tea party types probably excluded) know this too. The fact is that trying to set a debt ceiling separately from spending and taxation decisions makes for a mathematically over-determined system.
In simplified form, there are three variables in play: taxation, spending and the deficit (financing of which results in the government's debt). You can decide how much you want to spend and how much tax you want to raise, and then the deficit (and addition to debt) follows mechanistically. Or you can decide how much of a deficit you are prepared to tolerate and how much taxation you want to raise, and those two figures will determine how much you can spend. You can't determine all three things independently, yet that's what the debt ceiling attempts to do.
Most of the time, Congress has understood this and has basically waved through increases in the debt ceiling. However, the Republicans are running up a nasty little track record of using it to make the lives of Democratic Presidents difficult. Newt Gingrich did it to Bill Clinton back in the 1990s, and now John Boehner, egged on by the tea partiers, is doing it to Barack Obama.
In a sensible world, the GOP and the Dems would probably agree to do away with the debt ceiling altogether -- and indeed, Matt Yglesias at Slate has argued that the Democrats should be seeking exactly that, as part of their price for ending the current impasse. Chances of that happening seem infinitesimally small, and in this frankly scary article, Yglesias offers us a theory as to why that may be so, and why gridlock in Washington is likely to get worse, not better.
As Yglesias relates, a Yale political science professor, Juan Linz, concluded after researching governance in a wide variety of countries that the US system is fundamentally flawed. Successful democracies have governments headed by elected first ministers, with the President as a largely titular head of state. In the US, by contrast, both the President and the Congress can claim popular mandates to govern. As long as ideological differences among the main parties were fuzzy, this system could function with only occasional disruption. However, as the two main parties have become ever more ideologically distinct in recent years, willingness to compromise has shrunk alarmingly.
Linz, who died just last week, had come to regard the US system of government as a failure. And as Yglesias concludes, "That's very bad news for America, and nobody knows how to stop it".
Most economists and media commentators realize that the debt ceiling is far more trouble than it's worth, which is why it's an unknown concept outside the United States. It's likely that most politicians on both sides of the debate (the tea party types probably excluded) know this too. The fact is that trying to set a debt ceiling separately from spending and taxation decisions makes for a mathematically over-determined system.
In simplified form, there are three variables in play: taxation, spending and the deficit (financing of which results in the government's debt). You can decide how much you want to spend and how much tax you want to raise, and then the deficit (and addition to debt) follows mechanistically. Or you can decide how much of a deficit you are prepared to tolerate and how much taxation you want to raise, and those two figures will determine how much you can spend. You can't determine all three things independently, yet that's what the debt ceiling attempts to do.
Most of the time, Congress has understood this and has basically waved through increases in the debt ceiling. However, the Republicans are running up a nasty little track record of using it to make the lives of Democratic Presidents difficult. Newt Gingrich did it to Bill Clinton back in the 1990s, and now John Boehner, egged on by the tea partiers, is doing it to Barack Obama.
In a sensible world, the GOP and the Dems would probably agree to do away with the debt ceiling altogether -- and indeed, Matt Yglesias at Slate has argued that the Democrats should be seeking exactly that, as part of their price for ending the current impasse. Chances of that happening seem infinitesimally small, and in this frankly scary article, Yglesias offers us a theory as to why that may be so, and why gridlock in Washington is likely to get worse, not better.
As Yglesias relates, a Yale political science professor, Juan Linz, concluded after researching governance in a wide variety of countries that the US system is fundamentally flawed. Successful democracies have governments headed by elected first ministers, with the President as a largely titular head of state. In the US, by contrast, both the President and the Congress can claim popular mandates to govern. As long as ideological differences among the main parties were fuzzy, this system could function with only occasional disruption. However, as the two main parties have become ever more ideologically distinct in recent years, willingness to compromise has shrunk alarmingly.
Linz, who died just last week, had come to regard the US system of government as a failure. And as Yglesias concludes, "That's very bad news for America, and nobody knows how to stop it".
Monday, 30 September 2013
Germany discovers it's not easy (or cheap) being green
To the surprise of (I'm guessing) nobody, the latest report on climate change from the IPCC says the same as all of its earlier reports: the earth's climate is changing, and it's your fault.
The scientists have reached this conclusion despite the fact that global temperatures seem to have stopped rising in about 1998. Their response to "deniers" who say this means the climate change consensus may need rethinking is interesting: they point out that the past decade was on average warmer than the decade before. You probably don't need a degree in advanced statistics to figure out that such a statement is fully compatible with the possibility that warming stopped dead in 1998: it's just a "baseline effect".
Anyway, when the climate scientists deign to admit that maybe things haven't been going as forecast for the last decade and more, they refer to the apparent slowing in global warming as a "hiatus". It's not one that they predicted, but don't you dare suggest that the science might need a tweak. In fact, there's now a favoured hypothesis to explain the "hiatus": all the extra energy being produced by man's depredations is being stored in the deep oceans, a process that can't go on for ever. There's no evidence whatsoever to support this hypothesis, and again it's something that nobody forecast, but that isn't stopping the experts from attempting to stifle further debate by asserting that "the science is settled' -- which always strikes me as being a profoundly unscientific thing to say.
Be that as it may, it looks as though the UN will summon its members together sometime next year to try to strong-arm them into taking action to prevent the supposedly looming climatic disaster. Good luck persuading China or India or any other rapidly-industrialising country to go along with that. Richer countries may be easier to persuade, however, and indeed one -- Germany -- is already hurtling along the green path. And as this recent article from the New York Times makes clear, it's not a pretty sight.
Chancellor Merkel's government, under pressure from the country's sizeable Green Party, has set a goal of closing all the country's nuclear plants, phasing out the use of coal and moving to 80% renewable energy by mid-century. The costs are staggering, and they're leading to real changes in ordinary people's lifestyles -- like that of the man who told the NYT that high energy bills compelled him to use only one 5 watt light in his home and to stay out of his unheated living room! The engineering challenge of connecting all of the renewables to the grid is proving formidable, even for the Germans, and businesses are fretting about losing their competitiveness.
And here's the real killer point: it isn't working. As the article points out, Germany's carbon emissions actually rose last year, because coal-fired plants have to be fired up on the very frequent occasions when it's not sunny enough or windy enough for the renewable sources to be effective. Unless someone comes up with a whole new way of storing energy efficiently, this will always be the case.
If you want to eliminate fossil fuel-based power generation, there's a tested and reliable alternative out there: nuclear. But Germany has already ruled that out, and there's little enthusiasm for it in the rest of the developed world either, so we face a future of expensive and inherently unreliable energy supplies. The fact a major determinant of energy policies these days seems to be the Fukushima disaster -- which was caused by a catastrophic Act of God, and has led to precisely no radiation-related casualties -- is simply insane.
The scientists have reached this conclusion despite the fact that global temperatures seem to have stopped rising in about 1998. Their response to "deniers" who say this means the climate change consensus may need rethinking is interesting: they point out that the past decade was on average warmer than the decade before. You probably don't need a degree in advanced statistics to figure out that such a statement is fully compatible with the possibility that warming stopped dead in 1998: it's just a "baseline effect".
Anyway, when the climate scientists deign to admit that maybe things haven't been going as forecast for the last decade and more, they refer to the apparent slowing in global warming as a "hiatus". It's not one that they predicted, but don't you dare suggest that the science might need a tweak. In fact, there's now a favoured hypothesis to explain the "hiatus": all the extra energy being produced by man's depredations is being stored in the deep oceans, a process that can't go on for ever. There's no evidence whatsoever to support this hypothesis, and again it's something that nobody forecast, but that isn't stopping the experts from attempting to stifle further debate by asserting that "the science is settled' -- which always strikes me as being a profoundly unscientific thing to say.
Be that as it may, it looks as though the UN will summon its members together sometime next year to try to strong-arm them into taking action to prevent the supposedly looming climatic disaster. Good luck persuading China or India or any other rapidly-industrialising country to go along with that. Richer countries may be easier to persuade, however, and indeed one -- Germany -- is already hurtling along the green path. And as this recent article from the New York Times makes clear, it's not a pretty sight.
Chancellor Merkel's government, under pressure from the country's sizeable Green Party, has set a goal of closing all the country's nuclear plants, phasing out the use of coal and moving to 80% renewable energy by mid-century. The costs are staggering, and they're leading to real changes in ordinary people's lifestyles -- like that of the man who told the NYT that high energy bills compelled him to use only one 5 watt light in his home and to stay out of his unheated living room! The engineering challenge of connecting all of the renewables to the grid is proving formidable, even for the Germans, and businesses are fretting about losing their competitiveness.
And here's the real killer point: it isn't working. As the article points out, Germany's carbon emissions actually rose last year, because coal-fired plants have to be fired up on the very frequent occasions when it's not sunny enough or windy enough for the renewable sources to be effective. Unless someone comes up with a whole new way of storing energy efficiently, this will always be the case.
If you want to eliminate fossil fuel-based power generation, there's a tested and reliable alternative out there: nuclear. But Germany has already ruled that out, and there's little enthusiasm for it in the rest of the developed world either, so we face a future of expensive and inherently unreliable energy supplies. The fact a major determinant of energy policies these days seems to be the Fukushima disaster -- which was caused by a catastrophic Act of God, and has led to precisely no radiation-related casualties -- is simply insane.
Friday, 27 September 2013
Who are "the one percent"? Mark Steyn elucidates for you
"Everybody knows the game is fixed
the poor get poor and the rich get rich.
That's how it goes; everybody knows".
(Leonard Cohen, "Everybody knows")
Nowadays, just about everybody knows that the rich in America are getting exponentially richer, while the middle and working classes are finding it harder than ever to make ends meet. And if you asked most people who's fixing the game, they'd point to the rich, with their lawyers and their lobbyists. And if you asked them to name some rich people, they'd probably identify a Larry Ellison, or a Jamie Dimon, or a Carl Icahn, or just say, "Wall Streeters and hedge fund managers".
But if you asked Mark Steyn, you'd get a different answer altogether. This is from one of his columns written in the past few days, as the US lurches toward a government shutdown and possible debt default.
In 2012, the top 10 percent were taking home 50.4 percent of the nation’s income. That’s an all-time record, beating out the 49 percent they were taking just before the 1929 market crash. With government redistributing more money than ever before, we’ve mysteriously wound up with greater income inequality than ever before. Across the country, “middle-class” Americans have accumulated a trillion dollars in college debt in order to live a less-comfortable life than their high school-educated parents and grandparents did in the Fifties and Sixties. That’s banana republic, too: no middle class, but only a government elite and its cronies, and a big dysfunctional mass underneath, with very little social mobility between the two.
Got that? Inequality is rising because the Obama government is trying to redistribute income; and the rich are federal public servants and their "cronies". It's hard to imagine that Steyn really believes this, but then again, it's hard to imagine that he really believes a lot of the stuff that he writes. Still, if this really is the way that Tea Partiers and others on the right think, then they're even crazier than the rest of us thought they were.
the poor get poor and the rich get rich.
That's how it goes; everybody knows".
(Leonard Cohen, "Everybody knows")
Nowadays, just about everybody knows that the rich in America are getting exponentially richer, while the middle and working classes are finding it harder than ever to make ends meet. And if you asked most people who's fixing the game, they'd point to the rich, with their lawyers and their lobbyists. And if you asked them to name some rich people, they'd probably identify a Larry Ellison, or a Jamie Dimon, or a Carl Icahn, or just say, "Wall Streeters and hedge fund managers".
But if you asked Mark Steyn, you'd get a different answer altogether. This is from one of his columns written in the past few days, as the US lurches toward a government shutdown and possible debt default.
In 2012, the top 10 percent were taking home 50.4 percent of the nation’s income. That’s an all-time record, beating out the 49 percent they were taking just before the 1929 market crash. With government redistributing more money than ever before, we’ve mysteriously wound up with greater income inequality than ever before. Across the country, “middle-class” Americans have accumulated a trillion dollars in college debt in order to live a less-comfortable life than their high school-educated parents and grandparents did in the Fifties and Sixties. That’s banana republic, too: no middle class, but only a government elite and its cronies, and a big dysfunctional mass underneath, with very little social mobility between the two.
Got that? Inequality is rising because the Obama government is trying to redistribute income; and the rich are federal public servants and their "cronies". It's hard to imagine that Steyn really believes this, but then again, it's hard to imagine that he really believes a lot of the stuff that he writes. Still, if this really is the way that Tea Partiers and others on the right think, then they're even crazier than the rest of us thought they were.
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