Making Canada Relevant Again- The Economic Super-Thread

[Edward Campbell]

Andrew Coyne reports on the lack of growth in income inequality in Canada, and the Toronto Star's take on it, in this piece from the National Post's site which is reproduced under the Fair Dealing provision of the Copyright Act.

Andrew Coyne: Every one of the ailments we imagine ourselves to be suffering is a reality in the U.S.
Andrew Coyne | Dec 14, 2012 7:58 PM ET | Last Updated: Dec 14, 2012 9:39 PM ET

It was perhaps the most shocking headline ever to appear in the Toronto Star. “Income gap isn’t growing,” it ran, citing a “TD bank report.” Sure enough, the report found that income inequality in Canada has remained more or less flat since the mid 1990s. As if that were not alarming enough, it found median household incomes in this country grew steadily over the same period, to the point where they now exceed those of the United States for the first time in nearly 30 years.

The paper was clearly flummoxed. The story managed to extract a confession from the economist who did the study that he too had been “surprised” by the results (an “absolute stunner”). How to explain it? “Part of the problem,” the story mused — the “problem” being the failure of the data to show rising inequality — “is the way income inequality is measured.” That is, the study looked at inequality of income. But what about inequality of wealth? That could be increasing, couldn’t it? By the time the story appeared online the paper had recovered its composure. “Canadian income gap may be more real than data suggests,” the headline now read.

It shouldn’t really be surprising to find that none of it is actually true
In fact the study didn’t find any trend towards increased concentration of wealth, either. But never mind. The Star can be forgiven for its astonishment. Because if there has been one article of faith in recent years, not only in the Star but throughout the media, it has been that Canada is beset by “growing inequality,” to say nothing of “stagnating incomes.” Throw in the “vanishing middle class” and you have a catechism of media verities, repeated endlessly, just as if they were real.

And yet it shouldn’t really be surprising to find that none of it is actually true. It didn’t take a study by the TD Bank’s chief economist to disprove it. The evidence was sitting there the whole time on Statistics Canada’s website. All anyone had to do was look.

That’s not to say that income inequality was not growing in the past. Between 1989 and 1998, the Gini coefficient for Canada — a measure of inequality with 0 representing perfect equality and 1 being perfect inequality — increased from .38 to .42. It just hasn’t budged since then. (Possible Star headline: Income gap fails to narrow.)

Another way to look at inequality is to compare the fortunes of people in different income groups, usually quintiles (fifths), over time. Here again the picture is of stability, not stratification. As the TD economists found, incomes in the bottom quintile have grown by 20% since 1998, to 18% for those in the upper quintile. Again, while there was some widening of the gap in earlier decades — from 45% in 1976, the share of income going to the top fifth had increased to 50% by the mid 1990s — it has since held steady.

The picture is even brighter if you consider inequality in yet a third way: as the difference, not between rich and poor, but between the poor and the middle. The proportion of people living below Statistics Canada’s Low Income Cut-Off, a relativistic measure based on the proportion of its income a poor family would have to spend on necessities to maintain itself in the same style as the average family, has fallen from 15% in 1996 to 9% in 2010 — the lowest it has been since at least 1976. A more strictly relative measure, the number of those living below one-half the median income, shows no trend over the same period.

Why was income inequality growing before, and is not now? The explanation is very simple. In the early 1980s and early 1990s, Canada went through two nasty recessions — the first deeper, the second longer. Whenever there is a recession, and for some time after, more people are out of work for at least part of the year, and as such earning very little income. That drags down incomes for those at the bottom — hence increasing both poverty and inequality — but also for the median.

In the past two decades, however, Canada has experienced more or less uninterrupted growth. Hence falling unemployment, hence declining poverty, rising incomes and flattening inequality. Why has none of this registered in the public mind? Why have we heard nothing of the record low numbers living on low income? Why is it common knowledge things are getting more unequal, when in fact they are not?

One reason is that we have changed our definition of inequality. Instead of looking at the gap between rich and poor, or the poor and the middle, attention has shifted to the gap between the very rich and everyone else: the top 1%. Yet even here the “growing gap” is no longer growing. The share of all income going to the top 1%, according to figures provided to the TD by Michael Veall, the reigning Canadian expert on the subject, was 13.6% as of 2010, down from a peak of nearly 16% — again, about where it was in 1998. The big surge was in the decades before that.

So again: how have we convinced ourselves it is increasing? One is forced to conclude it is the influence of the American media. Every one of the ailments we imagine ourselves to be suffering is a reality in the United States: where our incomes are growing, theirs are stagnating; where poverty here is at record lows, there it is at record highs; where inequality in Canada has not grown in recent years, in the United States it has surged.

Again, the explanation, at least in part, is not hard to find. While we have been largely spared the ravages of recession in the last decade, the Americans have endured two, the last especially severe. The big surprise in that TD study, it would seem, is that Canada is not the United States.

Coyne's argument is, at least partially, offset by this graph:

Source: http://cdn.theatlantic.com/static/mt/assets/business/Pew_History_Middle_Class_Families_Income_History.PNG

In the 1980s and 1990s the rich got richer and, in the '80s, at least, the poor got poorer.

The graph refers only to the USA; the data will, I suspect be very similar for Australia, Britain and Canada, less similar (less inequality) for Denmark, Finland and Norway, and even less similar (far greater inequality) for Argentina, Brazil and Chile.

 

[a_majoor]

An interesting primer on "Social Impact Bonds". The PCPO has added this to their policy platform mix, which is a change from the usual "lets throw unlimited amounts of money at the problem" tropes. How this will work is an experiment I would love to see, radical changes are needed to both make a difference for people who are in need and for the taxpayer (who deserves better results for the money being spent). Follow the link for a large Q&A section:

http://www.americanprogress.org/issues/economy/report/2012/12/05/46934/frequently-asked-questions-social-impact-bonds/

Frequently Asked Questions: Social Impact Bonds

A social impact bond agreement involves the interests of multiple stakeholders, including agencies at different levels of government, the external organizations with whom the government will contract, the service providers whom the external organizations will oversee, the investors who will provide working capital to run the interventions, and the public at large.
By Kristina Costa, Sonal Shah, Sam Ungar, and the Social Impact Bonds Working Group | December 5, 2012
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Download the report:
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Social impact bonds are new and innovative financing mechanisms for social programs in which government agencies pay only for real, measurable social outcomes—after those results have been achieved. These tools effectively invert traditional government financing for preventive social services: In a social impact bond agreement, the government pays for realized outcomes at the conclusion of a contract, rather than paying upfront for programs or activities that may or may not have their anticipated effects.

At the same time, the social impact bond mechanism gives private investors the opportunity to provide operating funds for initiatives that have the potential to prevent or mitigate serious social problems and reduce government costs for later remedial services. These private funders make the initial investments in programs, and they are ultimately repaid, with a modest return, if the initiative is successful and achieves its goals.

It seems straightforward enough until you start to think about how social impact bonds actually work. Who chooses the required outcomes, and how are they set? Who decides if the outcome has, in fact, been achieved? How does the government decide what it will pay for a successful outcome? Who puts the “bond” in social impact bond? How long do these deals last? How can governments address appropriations for social impact bond payouts that may or may not happen? Who are the investors? Where is this tool appropriate to use, and where will it simply not work well?

Social impact bonds are complex tools, and a social impact bond agreement involves the interests of multiple stakeholders, including agencies at different levels of government, the external organizations with whom the government will contract, the service providers whom the external organizations will oversee, the investors who will provide working capital to run the interventions, and, of course, the public at large. All of these groups have similar questions and concerns about social impact bonds, as well as questions unique to their perspectives.

This Frequently Asked Questions guide is intended to address common questions raised by all of these stakeholder groups in plain, straightforward language. It is not, however, a comprehensive guide to designing, negotiating, or implementing a social impact bond agreement. Instead, this document should serve as a tool to direct your thinking as you consider how these new financing tools can be used in your agency or issue area.
This guide is divided into three sections. The first, “Social impact bonds 101,” answers basic questions about the tool, how it works, and who the key players are in any agreement. The second section, “Questions from government,” addresses technical concerns about budgeting, appropriations, and other topics. The third section, “Social impact bonds 201,” addresses higher-level questions about setting outcomes, evaluation methodology, and concerns about the tool’s function in government.


Questions guide was made possible by the knowledge and input of experts at Social Finance US, Third Sector Capital Partners, Nonprofit Finance Fund, McKinsey & Company, and within the federal government, among other organizations. The authors would like to expressly thank the members of CAP’s Social Impact Bonds Working Group: Beth Bafford, Laura Callanan, Sarah Chiles, Michelle Corson, Annie Donovan, Rick Edwards, Donald Gatlin, Kristin Giantris, Gary Glickman, Steve Goldberg, Jonathan Greenblatt, John Grossman, Kippy Joseph, Tricia Keller, Amy Klement, Margaret Kuhlow, Justina Lai, Noemie Levy, Karen Marangi, George Overholser, Bill Pinakiewicz, Jamal Simmons, Joe Shields, Kathy Stack, Rajan Trivedi, Adlai Wertman, and Mary Ellen Wiggins. Special thanks goes to Laura Callanan and Beth Bafford of McKinsey & Company for organizing and facilitating a presentation on Social Impact Bonds at SOCAP 2012, and to the participants in the presentation’s breakout sessions, who gave valuable feedback and comments on earlier iterations of many of these questions.

The Center for American Progress’s work on social impact bonds is made possible by the generous support of the Rockefeller Foundation.
Kristina Costa is a Research Assistant and Speechwriter at the Center for American Progress. Sonal Shah is a Senior Fellow at the Center and former director of the White House Office of Social Innovation and Civic Participation. Sam Ungar is a Special Assistant with the Economic Policy team at the Center.

To speak with our experts on this topic, please contact:
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202.481.8119 or apeterson@americanprogress.org

 

[Edward Campbell]

Some provocative thoughts on pipelines, petroleum and politics from Vancouver author Vivian Krause in an article which is reproduced under the Fair Dealing provisions of the Copyright Act from the Financial Post:

http://opinion.financialpost.com/2012/11/28/vivian-krause-u-s-greens-shut-down-canadian-oil/

U.S. greens shut down Canadian oil

Vivian Krause, Special to Financial Post

Dec 3, 2012

For U.S. foundations, this is about fossil fuels

Heads up, Canada! Our one and only big energy customer, the United States, isn’t going to need Canadian oil any more. That’s the implication of the International Energy Agency’s latest predictions. The U.S. will be the world’s largest oil producer by 2020 and a net oil exporter by 2030. Some say this could happen a lot sooner.

At the same time that the U.S. is fast becoming an energy exporter, American charitable foundations are restricting Canadian fossil fuel development with conservation initiatives that put huge areas of land off-limits to natural resources development. Whether it is their intention or not, large conservation areas are de facto trade barriers that would restrict Canada’s marine access to global energy markets — on all three coasts — and maintain the U.S. monopoly on Canadian exports, keeping Canada over a barrel and on the sidelines of the global energy market.

The downside of the U.S. monopoly on Canadian exports is huge. Joe Oliver, Minister of Natural Resources told the B.C. Business Council in a speech Tuesday that the Canadian economy loses out on $18-billion annually – $50-million every day – because Canadian oil is sold into the U.S. market below market value.

For the Canadians on the front lines of environmental conservation initiatives, it’s all about saving the bears, caribou, salmon and so forth. But for the U.S. foundations that fund these initiatives, this is about oil.

The largest environmental initiatives in Canada are the Great Bear Rainforest on the north coast of B.C., the Canadian Boreal Initiative and the Yellowstone to Yukon Initiative. In all three, the big funder is an American foundation.

Since the late 1990s the San Francisco-based William & Flora Hewlett Foundation (“Hewlett”) and the David & Lucile Packard Foundation (“Packard”), both created by the founders of tech giant Hewlett-Packard, have paid US$90-million to First Nations and environmental groups, tax returns show.

The Seattle-based Wilburforce Foundation, created by Gordon Letwin, one of the founders of Microsoft, has granted at least US$23-million to B.C. ENGOs and is the big funder behind the Yellowstone to Yukon Initiative which would restrict mining and energy development on a huge swath of North America, 3,200 km long and 500 km wide.

Hewlett’s Western Conservation strategy, co-funded by Wilburforce and others, aims to protect iconic species such as grizzly, lynx, beaver and bighorn. But there’s more to it than that. This initiative aims to restrict fossil fuel development on 85-million acres in the U.S., Alberta, B.C. and Yukon. In essence, they want eight parks, each the size of Switzerland.

Another Hewlett goal is that the energy supply is at least 25% renewable. As such, the focus on British Columbia is peculiar. B.C.’s energy is already 94% renewable, one of the best in the world.

The Pew Charitable Trusts (“Pew”), created by the founder of Sun Oil has put at least $57-million into the Canadian Boreal Initiative (CBI). Co-funded by Pew, the Hewlett foundation and the Gordon & Betty Moore Foundation, the CBI aims to restrict roads, hydro, forestry, mining and energy development on 1.2 billion acres of northern Canada. That’s 40% of Canada! Federal and provincial governments have pledged to put off limits nearly 600-million acres of northern Canada, an area a third larger than Alaska and California combined. Under Jean Charest, Quebec agreed to restrictions over an area the size of Texas, with strict restrictions on an area double the size of all U.S. national parks, combined.

Pew’s arctic initiative, Ocean’s North, aims to restrict offshore oil and gas drilling but what we hear about most is protecting the belugas, polar bears and the people of the north.

The same U.S. foundations that fund conservation in Canada also fund American groups working towards energy security, including a foundation called Securing America’s Future Energy. The name says it all.

“U.S. dependence on foreign sources of energy constitutes a serious threat – militarily, socially and economically,” says Pew’s Project for National Security, Energy and Climate. In Pew’s view, renewable energy is not only clean, it’s patriotic.

American foundations aim to reduce fossil fuel dependence to stop global warming and strengthen U.S. national, energy and economic security. That’s clear. What’s unclear is whether they fund conservation initiatives in Canada, in part, to foster U.S. energy security.

To address climate change, lead American foundations fund grassroots campaigns that bring about a “massive shift in investment capital” towards renewable energy and away from fossil fuels. This strategy is described in Design to Win, the touchstone paper of the Presidential Climate Project which aims to create the climate legacy of President Obama.

The main funder of the Presidential Climate Project is the Rockefeller Brothers Fund (RBF), the same foundation that is behind-the-scenes on the campaign to block the Enbridge Northern Gateway pipeline and ban oil tanker traffic – but only on the strategic coast of British Columbia and in the Canadian arctic. Never mind the dozens of tankers that import oil to the U.S. on a daily basis, the Rockefeller Brothers are only against the tankers that would export Canadian oil to Asia.

The Rockefeller Brothers have powerful connections in Vancouver. The founder and long-time chair of the U.S. Presidential Climate Action Project was the late Ray Anderson. One of many positions that he held was as a long-time director of the David Suzuki Foundation.

RBF’s point person for both the Presidential Climate Action Project and the campaign against pipelines and tanker traffic is the same person: Michael Northrop.

Mayor Gregor Robertson, now leading the charge to block expansion of oil tanker traffic, met with Mr. Northrop in 2010, at taxpayers’ expense, at the Rockefeller Brothers’ offices in New York. In a letter earlier this year, Robertson said that he met Northrop “on the advice of New York Mayor Michael Bloomberg’s office” and that “the discussions focused solely on Mr. Northrop’s work as a member of Mayor Bloomberg’s Sustainability Advisory Board and New York City’s long-term sustainability plan.”

Since the late 1990s, environmental organizations (ENGOs) in Canada have received at least 2,000 grants for a total of US$425-million from 40 American foundations, according to my analysis of U.S. tax returns. (Earlier this year, I reported US$300-million from 15 foundations.)

Tides Canada, the charitable foundation at the center of the foreign funding fuss, reported 45% of total revenue from outside Canada in 2011, up from 40% in 2010.

Almost all of the U.S. foundations that fund Canadian ENGOs are members of the San Francisco-based Consultative Group for Biological Diversity (CGBD), an umbrella organization created in 1987 by the U.S. Agency for International Development (USAID), an agency of the U.S. State Department. CGBD members have more than US$50-billion in assets. They granted a total of US$3.2 billion in 2010; they can’t be out-spent. The Hewlett foundation and the Packard foundation alone have spent more than US$1-billion on climate and energy-related initiatives since 2008.

The CGBD’s focus on Canadian oil is no coincidence. Back in 2000, the CGBD had a pivotal meeting in Vancouver with a focus on energy and “Northern North America” (read: Canada). A CGBD report on that 2000 meeting says that its focus on B.C. goes back to “an historic CGBD briefing” in the early 1990s. “Local hosts, the Endswell and Vancouver Foundations, threw a rollicking party for the region’s environmental workers and visiting funders at the Web Café” (at the Vancouver aquarium), says another CGDB document on that same meeting. For 15 years, Endswell’s president has been Joel Solomon, a big backer of Mayor Gregor Robertson.

In 2002, the CGBD held its annual meeting in Yoho National Park, near Field, B.C. The focus was “interrelationships of global warming, energy extraction and large-scale landscape protection.” Keynote speakers were David Suzuki and David Schindler of the University of Alberta.

Some U.S. grants are unusually large. For example, in 2003 the Rockefeller Brothers Fund granted US$1-million to First Nations on the B.C. coast. Of all 2,500 grants for US$227-million made by the Rockefeller Brothers since 2003, that was the third largest, according to my analysis of data from the U.S. Foundation Center.

Environmental and aboriginal groups say they call the shots with their American funders and yet many U.S. foundations don’t even accept unsolicited proposals. They have agendas of their own and have been funding the same groups for years.

In terms of earning and keeping a social license to operate, dialogue with front-line environmental and aboriginal groups is important but not enough. There’s an elephant in the room. Government and industry need to deal directly with the deep-pocketed foundations that write the big cheques.

Vivian Krause is a Vancouver researcher and writer. On Twitter she’s @FairQuestions.

This has a bit of a conspiracy theory whiff about it but it's hard to argue with her numbers.

 

[Edward Campbell]

And here, reproduced under the Fair Dealing provisions of the Copyright Act from the National Post, is columnist Andrew Coyne's assessment of 2012 from Prime Minister Harper's governing perspective:

http://fullcomment.nationalpost.com/2012/12/21/andrew-coyne-2012-the-year-the-harper-government-finally-found-a-sense-of-direction/

2012, the year the Harper government finally found a sense of direction

Andrew Coyne

Dec 21, 2012

Calendar years have no particular significance in the political or electoral cycle — except when they do. Though the Conservatives won the majority they had been three times denied in May of 2011, they did not begin to govern as a majority until this year.

Indeed, the date can be fixed with precision. It was Jan. 26, a Thursday. Until that time the government had been preoccupied with the preoccupied with leftover items from the minority years: the crime bills, the Wheat Board, the gun registry, and so on. On that day, Stephen Harper gave a speech in which he at last began to sketch out the broader agenda he had been at such pains to disavow until then.

This, it might be said, was the real Speech from the Throne (the one from the previous June being remembered mostly for a piece of performance art by an impossibly self-involved page), the occasion for the government to lay out before Canadians and their representatives “the unfinished business of the nation.” And so, naturally, it took place thousands of miles away, in Davos, Switzerland.

Even at that, it was pretty vague. A lot of talk about the aging of the population, and the challenges this presented, notably to social programs. “We’ve already taken steps to limit the growth of our health-care spending,” Harper noted, alluding to the previous month’s abrupt – or abruptly announced — decision to curb the growth in federal transfers to the provinces. Now, Harper said, “we must do the same for our retirement-income system.”

That got people’s attention, especially when, at a later press briefing, it was confirmed that, indeed, this included Old Age Security. But there was more: immigration reform (putting “our economic and labour-force needs” at the centre), free trade with Europe and India, a major push on pipelines (“we will make it a national priority to ensure we have the capacity to export our energy products”), a new science and technology policy.

They weren’t all new, or surprising. But it was the first time the prime minister had tied them together into a coherent whole, with a common rationale: facing a future with relatively fewer workers paying to look after relatively more elderly, Canada needed to rein in spending on the elderly, to put more people to work, and to get more output out of each worker — that is, to raise productivity.

And indeed, the speech set the template for the rest of the year. OAS was indeed reformed, at surprisingly little political cost (notwithstanding the government’s singular inability to explain the need for it in an understandable way — apparently Davos was a one-off). Immigration minister Jason Kenney pushed through a series of changes that amounted to a top-to-bottom policy overhaul. Free trade talks with Europe are said to be nearing completion. If the Jenkins report on innovation policy was a disappointment, it was at least another item ticked off on the Davos agenda.

Only on the pipelines question, notably the Northern Gateway in British Columbia, did the government find itself stymied, a product of its over-reliance on bluster and bullying over arguments and facts. It is now reduced to the slim hope that the National Energy Board, which it had earlier sought to bring more firmly under its command, can come to its rescue, endorsing the project in terms so sweetly reasonable as to overcome the B.C. public’s fears. Good luck with that.

All in all, however, this was the year the Harper government finally found a sense of direction, after so many years of seemingly aimless tacking about (of which the Nexen decision was an unfortunate reminder). Alas, it was also the year in which it was confirmed that, when it came to its relationship with Parliament and observance of basic democratic norms, nothing had changed from the confrontational minority government days.

There had been some speculation after the election that, majority in hand, Harper might finally loosen up a little, allow his backbenchers a little more dignity. Not a bit of it. Indeed, of the three major controversies — scandals, if you like — that pursued the government through much of the year, two had their roots in the election itself.

The government’s refusal to give an honest accounting of the costs of the F-35, either to Parliament or the Parliamentary Budget Officer, was in fact one of the election’s major causes. The Auditor General’s report this spring not only exposed how grossly the government had understated the costs, but also how far out of control — literally — Defence procurement had become, though it was not until this month’s KPMG report that we finally got a full accounting.

Yet at year’s end, it’s still not entirely clear whether the government has learned anything. We may stick with the F-35. We may not. We may go to competitive bids. We may not.

Meanwhile, the robocalls scandal has slowly dragged on, a steady drip of voter complaints, revelations arising from Elections Canada’s continuing investigation, and court testimony. Nothing as yet indicates any senior Tories knew about or colluded in attempts to mislead or harass voters in the last days of the campaign, but neither does it seem plausible that it was all the work of a few overzealous kids. The calls are too many, in too many ridings, with too much sophistication required.

Last, there are the omnibus budget bills, I and II: the point at which the government’s emerging policy ambitions and continuing contempt for Parliamentary democracy converge. I’ve said my fill about these earlier, so I’ll be brief here. When much of the government’s legislative agenda can be pushed through in a single bill, or two; when “debate” on these hydra-headed monstrosities is itself cut short by government fiat; when these arrive on top of the whole long train of abuses to which Parliament has already been subjected, starting under past governments but with conspicuous enthusiasm under the present – then the question for next year, and for years to come, is clear. It is whether we will still live under a Parliamentary system of government, or something else.

I agree that the Jan speech as Davos was an important, even pivotal event; I also agree that there is still much to be done.

We need to take Coyne's F-35 comments with a grain of salt: the entire commentariat has a vested interest in this "story" which is, at bottom, really an accounting debate about an important, high value, project.

Finally, parliamentary democracy is not in danger ~ no more than it was in the 1730s when Robert Walpole was as hated and reviled as is Stephen Harper today. Britain both survived Walpole and has every reason to be grateful for his stewardship and direction; we see Walpole, now, as being amongst Britain's greatest ever statesmen; I expect Canada will survive Stephen Harper and, eventually, see him as, at least, a good prime minister.

 

[GAP]

I expect Canada will survive Stephen Harper and, eventually, see him as, at least, a good prime minister.

I think there are a majority of Canadians who already agree with you...

 

[foresterab]

Taken from the Globe and Mail today:http://gold.globeinvestor.com/servlet/ArticleNews/story/GI/20130103/escenic_6902741/stocks/news/&back_url=yes


Streetwise: Why the global banks love Canada
BOYD ERMAN
13:53 EST Thursday, Jan 03, 2013
 


China is growing, London remains crucial as a global financial centre, but the real money in investment banking lately is in Canada.

For the first time since Thomson Reuters began tracking fees in 2000, Canadian deals produced more investment banking fees than those in any country save the United States last year. Canada jumped to the No. 2 spot globally in 2012 from No. 4, according to Thomson Reuters, leapfrogging much bigger countries.

Canada generated almost $4.9-billion (U.S.) of investment-banking fees for banks, a 9.1-per-cent increase from 2011 and about 6.5 per cent of the global total. In comparison, the United Kingdom, home to the global financial centre that is London, generated $3.76-billion and the United States rang up $35.6-billion.

Canada’s economy is far smaller than that of countries such as China, Brazil, the United Kingdom and Germany, but the deal economy is much stronger as foreign capital floods into Canadian resources and strong Canadian companies look to acquire abroad.

Every time they do make a purchase, or raise money through a loan or a stock sale, that means fees for banks. And that revenue is drawing banks to Canada even as they retrench in other financial centres.

“If you look at where the growth is in that fee wallet, it’s clearly cross-border,” said Bruce Rothney, Canadian country head for Barclays, one of the global banks that has made a big investment in Canada in recent years.

“We think about bringing Canada to the world and the world to Canada, and I think everyone is thinking along those lines,” Mr. Rothney added.

The result is that the investment banking hubs of Toronto and Calgary are thriving, relative to cities such as New York and London. Employment in the securities industry in Canada has held steady at around 40,000 people in recent years, while other global financial centres have seen mass layoffs. International firms are in many cases expanding in Toronto and in the oil patch.

Jefferies & Co., one of the big independent U.S. firms, last year opened up an investment-banking business in Canada. Stifel Nicolaus, another independent in the U.S., has quietly been growing. Merger advice boutique Evercore Partners set up shop. The locals are also doing well, with four Canadian firms making the Thomson Reuters ranking of the top 25 banks by fees won.

“We had one of our best years that we’ve ever had,” said Darryl White, head of global corporate and investment banking at Bank of Montreal’s capital markets unit, which jumped six spots to 18th place.

Canada has consistently punched above its weight in fees, ranking in the top five for many years running with China, Japan, the U.K. and the perennial No. 1, the U.S. That’s something Mr. Rothney said he was surprised to find when researching the market when joining Barclays in 2010 to lead its expansion in Canada.

“Canada has been very strong for a number of reasons,” he said. “Clearly the resource economy piece is a long-term secular trend that we don’t see going away.”

However, it’s also easy to forget, with all the hooplah generated by big foreign acquisitions of Canadian resource producers, that Canadian firms spend a lot of money acquiring companies abroad – more than flows into Canada in many years.

Big drivers of that are Canada’s huge pension funds, which buy assets all over the globe. The pension funds have more than “$1-trillion of buying power there and they are pound for pound among the smarter investors,” Mr. Rothney said.

If there’s one underlying concern, however, it’s that Canada is “dumping all eggs into one basket,” said capital markets recruiter Bill Vlaad, head of Vlaad & Co. Many firms are largely focused on commodities, and still adding. Mr. Vlaad says he knows of about a half dozen openings for senior mining bankers.

If there’s a sustained downturn in deal making in those sectors, serious downsizing in groups dealing with mining, energy and agriculture could be the result.

“We are right out at the end of the diving board when it comes to the mining and oil gas focus, which is great when we are digging and drilling but what happens when we are not?” Mr. Vlaad said.




This is huge in attracting the financial capital needed for major infrastructure and advanced resource development but also comes with a big risk as the article states "“We are right out at the end of the diving board when it comes to the mining and oil gas focus, which is great when we are digging and drilling but what happens when we are not?”    So a great first step that hopefully leads to another.

 

[a_majoor]

While this article is about the United States, it has pratical applications for Canada as well. On theme running through this thread is why Canadian productivity is so low? Part of this may well be regulatory failure; the process of governments diverting savings and investment towards crony capitalists through the taxation process ("picking winners and losers"). Notice that in several of the examples presented, the "next stage" isn't intuitively obvious (garments to electronics?), so bureaucrats might never be able to discern and exploit these possibilities. F.A. Hayek discovered why this is true when discussing the "Local Knowledge Problem"

http://www.technologyreview.com/news/509281/you-must-make-the-new-machines/

You Must Make the New Machines

Economist Ricardo Hausmann says the U.S. has a chance to invent the manufacturing technology of tomorrow.

    By Antonio Regalado on January 4, 2013

Why It Matters

Rather than trying to bring back manufacturing jobs, the United States could find a comparative advantage in new types of manufacturing machinery.
Part of our Business Report:
The Next Wave of Manufacturing

Understand the technology and ideas behind the manufacturing renaissance.
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Product space: Harvard economist Ricardo Hausmann advises governments on what to manufacture.

The U.S. has lost millions of manufacturing jobs since 2000. Industries have moved offshore. America’s trade deficit in physical goods is $738 billion a year.

So what’s the path forward?

Countries trying to understand what’s next for their export industries often call Ricardo Hausmann. The Harvard economist and onetime planning minister for Venezuela has developed a kind of economic aptitude test for nations. Using complexity theory and trade data, Hausmann looks at what a country is good at making and predicts what types of more valuable items it could produce next.

That sounds plain enough, but the results of Hausmann’s analyses are often surprising. A country with a competitive garment industry might want to move into electronics assembly—both need an industrial zone with quality electrical power and good logistics. A country that exports flowers may find it has the expertise in cold-storage logistics necessary to spark an export boom in fresh produce.

Hausmann, who is director of Harvard’s Center for International Development, spends much of his time helping nations that are just beginning to modernize their industries, such as Angola and Nigeria. MIT Technology Review asked him what his research methods predict about opportunities for manufacturing in the United States.

Why has the number of American manufacturing jobs been decreasing so quickly?

The fundamental reason is that productivity in manufacturing has been rising rapidly and demand for manufactured products has been growing more slowly. To supply the stuff that people want requires fewer jobs.

And then, manufacturing is becoming feasible in more parts of the world. There is more competition, including from countries with much lower wages. As they emulate American production, they take market share.

What’s the best manufacturing strategy for the U.S. in that situation?

It’s certainly not playing defense and trying to save jobs. The U.S. has very, very high wages compared to other countries. Yet it also has a comparative advantage, which is deep knowledge, high R&D intensity, and the best science and technology base in the world.

The step that makes the most sense for the U.S. is to become the producer of the machinery that will power the next global manufacturing revolution. That is where the most complex and sophisticated products are, and that is the work that can pay higher wages.

What kind of revolution are you talking about?

My guess is that developments around information technology, 3-D printing, and networks will allow for a redesign of manufacturing. The world will be massively investing in it. The U.S. is well positioned to be the source of those machines. It can only be rivaled by Germany and Japan.

You look at economies as “product space.” What do you mean by that?

The product space is the space of all possible products. The metaphor is of a forest. Each product is a tree, and companies are monkeys that are organizing and taking over the forest. Empirically, we’ve shown monkeys don’t fly. They move to nearby trees, or to industries for which they have many of the required productive capabilities.

So if you have the capability to make a regional jet, you may be able to make a long-haul aircraft. But if you are making only garments, figuring out how to make any kind of jet will be very hard. Countries that grow find a “stairway to heaven”—a sequence of short jumps that gets them far.

How does that type of analysis help a country know what to do next?

Think about a developing country that exports raw commodities. The traditional way that people have thought about it is to add value: if you have trees, try to export paper or furniture rather than wood.

But the product space may actually argue against the idea that countries should add value to their raw materials. The way a country like Finland got transformed is that they moved from cutting wood to making machines that cut wood, to making machines that cut other things, to other types of machines, and eventually to Nokia.

So what are the opportunities for the U.S. in product space?

The U.S. has the problem that it’s competing with countries that pay much lower wages. American monkeys are under stress from other countries’ monkeys in regards to less complex, easier-to-make products. So the U.S. should look to the taller trees. The tallest trees in product space are pharmaceuticals, chemicals, and machinery. It’s very hard to get into those. Very few countries are in that game.

That is why I say the really long-term play is for the U.S. to be the source of the machinery that will power the coming global manufacturing revolution. The U.S. can grow by using capabilities that few others have.

Is there a manufacturing technology you see as game-changing?

I think 3-D printing could change the dynamics. I use 3-D printing as shorthand for shorter production runs, more design, and much closer to the market. It’s a paradigmatic shift in what manufacturing is going to look like.

Historically you think of manufacturing as an assembly line with thousands of workers, the UAW [United Auto Workers union], and benefits. But here we are talking about very small batches, made close to consumers, and customized. It will still be manufacturing, but a different kind of job in a different kind of company whose organization we don’t yet know.

Will the U.S. create jobs in this way?

If anything, a manufacturing revolution is going to accelerate a trend toward more efficiency. So from that point of view, for the U.S. to base its employment strategy on manufacturing sounds unrealistic. Manufacturing is low-employment. 

What else is the U.S good at manufacturing?

If you look broadly at the U.S. product space, the country is super-competitive at agriculture and the industries that support it, like farm machinery, agrochemicals, and genetically modified seeds. It is strong in aerospace with Boeing, GE, Northrop Grumman, and Pratt & Whitney. It is a leader in pharmaceuticals and medical equipment, and it is the clear leader in information technology and the Internet. New industries often arise from the combination of capabilities, such as biotechnology that can move from medicine to seed development and pest control

How well is the U.S. doing in staying competitive?

For a while now, the U.S. has been much less focused on being competitive than most other places are. Americans have the feeling they are born to win, and if they don’t, someone else is cheating. The U.S. has many self-inflicted wounds. It has an infrastructure that’s increasingly lousy and a corporate tax rate higher than most countries’. But the most important [problem] is immigration policy. It’s been a real disaster by preventing the attraction and retention of the high-skilled people who come here to study and then don’t stay.

 

[Edward Campbell]

It really is  :deadhorse:  day today; here is an article about another of my favourites ~ the relationship I believe exists between "freedom" and prosperity (economic relevance) ~ which is reproduced under the Fair Dealing provisions of the Copyright Act from the Fraser Institute's web site:

http://www.fraserinstitute.org/research-news/news/display.aspx?id=19171

Canada, Australia and Ireland tied for fourth in new comprehensive index of human freedom; New Zealand No. 1 and the U.S. and Denmark tied for seventh

Media Contacts: Fred McMahon

Release Date: January 8, 2013

TORONTO, ON—Canada ranks fourth overall for its level of personal freedoms, tied with Ireland and Australia, while New Zealanders have the most freedom in the world, according to the most complete index of human freedom yet available, released today by the Fraser Institute, Canada’s leading public policy think-tank, and Germany’s Liberales Institut.

The index is contained in a new book, Towards a Worldwide Index of Human Freedom, which examines the characteristics of “freedom” and how it can best be measured and compared between different nations.

“Our intention is to measure the degree to which people are free to enjoy classic civil liberties—freedom of speech, religion, individual economic choice, and association and assembly—in each country surveyed. We also look at indicators of crime and violence, freedom of movement, legal discrimination against homosexuals, and women’s freedoms,” said Fred McMahon, Dr. Michael A. Walker Research Chair in Economic Freedom (Fraser Institute) and editor of Towards a Worldwide Index of Human Freedom.

“The classical ideas of freedom from the time of the Enlightenment included economic freedom as essential to other freedoms, yet all the indexes available up to now either measure civil and political freedoms, often confusing what freedom actually is, or economic freedom alone. This is the first index that brings together these classic ideas of freedom in an intellectually consistent index.”

The book is the first publication of the Human Freedom project sponsored by the Cato Institute (United States), as well as the Fraser Institute and the Liberales Institut.

New Zealand offers the highest level of human freedom worldwide, followed by the Netherlands then Hong Kong. Australia, Canada and Ireland tied for fourth spot, with the United States and Denmark tied for seventh, Japan and Estonia tied for ninth overall. The lowest-ranked countries are Zimbabwe, Myanmar, Pakistan, Sri Lanka, and Syria.

Towards a Worldwide Index of Human Freedom also highlights the evolution of economic, political, and social freedoms from the ancient world to the present day over the course of 10 chapters by 13 academics and economists from Canada (Fraser Institute, Canadian Constitution Foundation), the United States (Cato Institute, Emory University), Germany (Liberales Institut, Goethe-University Frankfurt am Main), and Russia (Institute of Economic Analysis). Chapters of note include:

“From Pericles to Measurement” by Fred McMahon (Fraser Institute)

This article traces the concept of freedom back to the classical world and examines more recent discussions of freedom from the Enlightenment through to modern analytical scholarship. McMahon concludes that modern indexes are incomplete and often inconsistent. He argues for a complete measure of freedom that is consistent with the most common sense idea of freedom—Isaiah Berlin’s concept of “negative” freedom, meaning the absence of restraints on individual actions.

“An Index of Freedom in the World” by Ian Vásquez (Cato Institute) and Tanja Štumberger (Atlas Economic Research Foundation)

The authors develop the initial draft of an objective measurement of overall human freedom, for the first time combining economic freedom with other forms of freedom. Such a measure will enable researchers to answer important questions on the impact (good and bad) of negative freedom and what supports freedom or undermines it.

“From Fighting the Drug War to Protecting the Right to Use Drugs” by Doug Bandow (Cato Institute)

Bandow argues that to “have meaning, liberty must protect the freedom to act in ways which may offend individuals and even majorities. So it is with ‘drugs’ currently banned by the U.S. and other governments.” This should apply whether or not legalization produces bad results, but the author argues that a well-structured legalization will reduce harms, not increase them. More importantly, the author suggests the War on Drugs has sideswiped and reduced a range of other freedoms. For these and other reasons, the paper argues that drug use should be treated as “a protected liberty.”

“A Compact Statement of a Cost-based Theory of Rights and Freedoms” by Michael A. Walker (Fraser Institute)

The author draws a distinction between two types of freedoms: those that are costless or low cost for a society to provide and those which require the expenditure of resources to provide. The first set simply requires government to refrain from acting. Costly rights include security of property and persons and some aspects of freedom of speech, the latter because government needs to actively protect those who say unpopular things.

“The idea of freedom is one of the most contested in political and philosophical discourse and one of the most vital,” McMahon said.

“Our book lays the foundation for a rigorous analytical framework and measurement to improve the objective measurement of human freedom worldwide.”

The entire book is available for (free) download here.  The "freedom" rankings can be found on p. 63. It is worthwhile noting that Hong Kong, despite having a (relatively) low index of "personal freedom" (7.8 ) has such a high index of "economic freedom" (9.2) that it, narrowly, squeaks past Australia and Canada to capture 3rd spot. Check out the bottom of the list: Zimbabwe, Burma, Pakistan, Sri Lanka and Syria ~ pretty much a good description of where one might start a global enema. Note, also, that Singapore, which I often hold up as a "beacon" conservative democracy is ranked fairly well down the list because of a low (6.6) personal freedom score which is attributed to the liberal bias of the authors who are concerned because Singapore restricts "freedom of association" and, to a lesser extent, "freedom of speech."
 

 

[foresterab]

http://gold.globeinvestor.com/servlet/ArticleNews/story/GI/20130109/escenic_7095413/stocks/news/&back_url=yes


This article shows one of the issues with urban planning that again shows a big bottleneck on the Canadian economy as a whole.  With ~ 9 million residents betweeen Vancouver, Toronto (GTA area) and Montreal we are now talking about ~25% of the population of Canada spending large amounts on time in commutes.  While I don't have solutions it does show some of the impacts poor, long term urban planning can have moving forward.


Top Business: Vancouver, Toronto, Montreal among worst for traffic congestion in N. America
Michael Babad
07:52 EST Wednesday, Jan 09, 2013
 

These are stories Report on Business is following Wednesday, Jan. 9, 2013.

Follow Michael Babad and the Globe’s top business stories on Twitter.

Road runners
Vancouver, Toronto and Montreal rank among the worst cities in North America for traffic congestion, according to an annual study.

The findings by TomTom are important because, not only is there our frustration level to think of, there’s also the issue of time spent getting to and from work, and, thus, our productivity (particularly given that we’re not supposed to be on our smartphones while driving).

No surprise here, but the worst city is Los Angeles, where it takes drivers 34 per cent longer, on average, to get where they’re going than when traffic is “flowing freely.” And, of course, it’s far higher in rush hour. The average for North America is 19 per cent, according to the third such study by TomTom, a manufacturer of navigation products based in Amsterdam.

What may be more surprising is that the three Canadian cities rank in the top 10, which, of course, means the 10 worst. Indeed, Vancouver holds the distinction of being No. 2, and shares with L.A. the 34-per-cent level.

Vancouver is followed by San Francisco in the No. 3 spot (33 per cent), Honolulu at No. 4 (31 per cent), and Seattle at No. 5 (27 per cent). The next five, in order, include Toronto (26 per cent), New Orleans (25 per cent), San Jose (25 per cent), Montreal (24 per cent) and Chicago (24 per cent).

The TomTom Congestion Index is based on data from July to September of last year.

Read the TomTom study
Interactive: Why's the most congested street in Toronto?
Toronto Police Chief Bill Blair calls for return to photo radar

 

[Edward Campbell]

In densely populated urben centres - and I am most familiar with the ones in Asia - the trick seems to be:

1. Build excellent high speed, reliable, high capacity and cheap public transit networks - a mix of busses, trams and trains;

2. Make it hard for private autos to stop or park on inner-city streets;

3. Conversely, make it easy for taxis , buses and commercial vehicles to use all roads; and

4. Use the underground as much as possible - including tunnels for autos and trucks.

 

[a_majoor]

Years ago, when I ran for Mayor, I did discover a reasonably flexible, low cost alternative for Canadian urban centers. Known as "Bus Rapid Transit (BRT)". it involves subdividing the city into local areas, which feed into BRT terminals. The "Rapid Transit" buses move quickly between terminals (sometimes they are assisted by special bus only lanes or using an "opticon" to trigger green lights ahead of them, depending on the urban infrastructure available), depositing the riders back to another local network.

For a city like London, BRT eliminates the long and arduous bus routes that run from one end of the city to the other (which often take over 2 hr to ride), as well as eliminating a well intentioned bottleneck in the system (in order to please downtown merchants and "save the core" activists; all bus lines run through downtown) without requiring much more than rerouting and rescheduling most of the buses. There are several large shopping malls spaced around the perimeter of the city, some with "terminal" type bus stop layouts already, which would be an ideal fit for the network/BRT terminals.

As a lesson in politics, although it would seem to be very cheap in theory, the manager of the LTC attached a huge price tag to this, evidently intending to piggyback fleet renewal and a host of other things onto the project. The last two city councils didn't bite, and the BRT idea seems to have faded away.

 

[a_majoor]

Regulatory failure on a grand scale. Milk quotas are used to keep a competitor out of the Canadian market, destroy investment and jobs and keep consumers paying more for their products. The government can't move fast enough on this file, and waiting for the TPP as a cover to take action, while strategically "smart", is still hurting Canadians in the short and medium term. Upthread I posted an earlier story about this; because of the quota system farmers cannot sell milk at a premium to this company but must accept a much lower price to sell the milk as animal feed, so this hurts farmers as well:

http://opinion.financialpost.com/2013/01/08/banned-in-canada/

Banned in Canada
Ian Cumming, Special to Financial Post | Jan 8, 2013 8:17 PM ET | Last Updated: Jan 8, 2013 8:22 PM ET
More from Special to Financial Post

Ontario Chobani plant still on hold after a year

Eleven months ago when former Ontario agriculture official Jack Rodenburg announced at the Woodstock dairy conference that the world yogurt phenom, Chobani, was going to be building a plant in Ontario to manufacture Greek yogurt and that it had just been approved by the Ontario government, he never predicted this.

But within the Canadian farm marketing system, how could it have been otherwise? That by the end of the year — after more than $1-million in lawyer fees on each side and major infighting within the warped tangle of the Canadian dairy supply management system — no construction would even get started.

Who would have guessed that a Nov. 27 meeting between producers, processors and government bureaucrats would try in vain to resolve the core issue: providing an adequate milk supply for Chobani. They failed miserably.

“One of the hurdles that Chobani has faced in coming to Canada has been acquiring an adequate long-term milk supply,” Chobani officials emailed me on the record. The Dairy Farmers of Ontario (DFO), they said, “has committed milk supply for the first year of production and Chobani’s still waiting to confirm long-term supply.”

Early in 2013, nothing has changed. The New York-based company that owns Chobani has a temporary import quota to bring in yogurt from the United States. But that permit expires at the end of February. That could spell the end of Chobani in Canada.

While the company has been waiting for a milk quota that may never come, a major new Chobani plant in Twin Falls, Idaho, was under construction, a plant that was proposed for Idaho at roughly the same time as the first proposal for the Ontario plant. The Ontario plant, to be built in Kingston, Ont., would be a fraction of the size ($75-million) compared with Idaho ($450-million). Today, the Idaho plant is in operation, using five million pounds of milk per day from U.S. dairy farmers, and manufacturing 4.2 million cases of yogurt per week. Ontario has nothing, and it is still unclear that Ontario ever will have a Chobani plant.

For starters, there is still the unresolved issue of plant quota. In Canada, the total amount of yogurt allowable is strictly controlled. Under an agreement set in November 2011, the marketing board powers in Eastern Canada — Ontario, Quebec, and three provinces from Atlantic Canada — suddenly established a global plant quota for yogurt for the region. In the allocation of quota, 70% was awarded to Quebec.
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No new quota was added for Ontario, where Chobani was applying to build its plant. Chobani had Ontario government approval for the plant but with no quota there is no milk supply. That’s the way the system works in Canada. You can get government approval to build a 5,000-cow dairy barn, but the milk marketing system won’t allow you to buy that much milk-producing quota.

Transcripts of a court case in Montreal show who Chobani’s opponents are: The Dairy Farmers of Canada and milk processors in Quebec and Ontario. While stalling the milk supply issue in court, the existing big processors have been introducing their own Greek yogurt brands. Those brands were also introduced south of the border, where Chobani is decimating them in a competitive environment.

Chobani believes it can beat the competition in Canada, if it were legally allowed to do so.

On Dec. 13, job postings for the proposed Kingston plant appeared on the Chobani website. They are a hopeful, growing kind of company, and should be. New York government officials want its state’s farmers to increase production by 20% by 2014 to accommodate Greek yogurt’s demands for milk.

So the CEO of Dairy Farmers of Ontario and the DFO’s Kingston-area board member were called by The Kingston Whig-Standard for comment on the new jobs. Good news, right? But enthusiasm seemed lacking. The Chobani’s plant role in the milk supply would be “minimal” and “incremental.”

The claim was that Chobani only tried to get into Canada “after” the yogurt plant quota system had been installed in Quebec, Ontario and the three Atlantic provinces. That’s what Peter Gould, CEO of DFO, said. However, documentation introduced into a Montreal court showed that the DFO and government had started working with Chobani months before the November quota system was installed.

In any case, on Dec. 14 — the day after The Kingston Whig-Standard wrote a story — Chobani pulled its job postings and Kingston city officials, after some closed-door meetings, started to publicly fret on radio, television and to the Whig-Standard, that the project was in jeopardy.

“They’re [Chobani] all over Europe, they’re going to Singapore, they’re expanding in Australia, they’re expanding in the U.S. and they’ve been two years with a supply management system stuck in Canada,” said Jeff Garrah, CEO of the Kingston Economic Development Corporation on Dec. 14. “And growing very frustrated and I can appreciate that.”

Al Mussell, a senior research associate at the George Morris Centre in Guelph, says the system is rigged to prevent new entrants and new competition. “The system wasn’t developed with this sort of thing in mind,” he told The Kingston Whig Standard. “Somebody wants to establish a brand-new, greenfield facility that wants a vast amount of milk.” But new milk is not available and a province just can’t unilaterally increase its quota. “You can’t do that,” Mussell said.

So that’s where things stand right now. No new yogurt plant in Kingston, the Chobani import permit is set to expire, the entrenched Ontario and Quebec trade protectionist yogurt makers are cranking out Greek yogurt with limited success, and competition is stifled.

Financial Post

Ian Cumming is an Ontario dairy farmer whose family also operates a dairy farm
in New York state.

 

[Jed]

How about attempting to encourage Canadians to develop smaller urban centres, say 10,000 people or so instead of pushing the trend for everyone to move into the city?  The wear and tear on the infrastructure should be considerably less, and hopefully the pace of life would slow down and be less stressful.

With modern technology, many bureaucratic office jobs no longer need to be done in larger centralized locations. Service jobs are the same whereever they are undertaken.

 

[dapaterson]

How about attempting to encourage Canadians to develop smaller urban centres, say 10,000 people or so instead of pushing the trend for everyone to move into the city?  The wear and tear on the infrastructure should be considerably less, and hopefully the pace of life would slow down and be less stressful.

With modern technology, many bureaucratic office jobs no longer need to be done in larger centralized locations. Service jobs are the same whereever they are undertaken.

Cities create less infra demands, not more.  It's much less expensive to service a highrise, for example, that to service two hundred suburban homes.

 

[Jed]

You state that Cities need less infrastructure, I assume because of economies of scale, ie: appartment buildings vs sprawling urban homes, etc. I don't by that.

You can do the same types of building infra in smaller cities and it will work just fine. Less grand transportation infrastructure, power supply, water and sewer etc. I believe, will be environmentally better at a similar cost benefit ratio.

 

[a_majoor]

Looks like the quota system has killed an economic development in Kingston. While waiting for the TPP to ptovide cover may be the politically correct way for the government to move against the marketing board regime without expending too much political capital, it is frustrating as hell to be a consumer and shafted by the milk cartel, and I imagine just as frutrating to be in the business, or even a farmer forced to sell their milk for lower prices as animal feed rather than at a premium to this company:

http://opinion.financialpost.com/2013/01/18/terence-corcoran-the-chobani-milk-shakedown/

Terence Corcoran: The Chobani milk shakedown

Terence Corcoran | Jan 18, 2013 8:36 PM ET | Last Updated: Jan 18, 2013 8:51 PM ET
More from Terence Corcoran | @terencecorcoran

If U.S. yogurt maker retreats, it will add to the twisted history of supply management

The situation looks fluid, but there’s a good chance Chobani’s plans for a yogurt plant in Kingston, Ont., have been sent packing by Canada’s monstrous supply management regime. “Challenges have forced us to take our cups out of Canada,” said a Chobani corporate tweet Friday to a European editor for Dairyreporter.com. The tweet says Chobani aims to “come back” to Canada, but doesn’t say when.

It could be a temporary thing, as suggested by a subsequent email to the National Post late Friday from Nicki Briggs, Chobani’s chief communications officer.

    The current challenge faced by Chobani is its import permits, which have yet to be extended. As a result, Chobani has been unable to move forward with national launch plans and its products are currently unavailable on store shelves in the Greater Toronto Area. Tweets from Chobani refer to the fact that it is not currently available in any Canadian stores. However, Chobani has not exited this market and remains committed to bringing its yogurt to Canadian consumers.

Whatever’s going on, it doesn’t look good. The Chobani project for Canada is the ultimate test of whether anything can ever be done to change dairy supply management, or whether it will continue to be what it has always been: a twisted protectionist infighting parochial devious bureaucratic secretive conniving games-playing court-battling growth-killing consumer-screwing political snakepit.

The privately held New York-based Chobani first applied formally about a year ago to build a $75-million plant in Ontario to supply Canada with Greek yogurt, the world’s hottest dairy product. To help with entry into the Canadian market, it also applied to Ottawa for — and received — temporary permits to import limited quantities of U.S.-made Chobani yogurt into Canada on a duty-free basis, pending construction of the Kingston plant.

The temporary duty-free deal expires in a few weeks, but no plant is under construction — a tribute to the obstructionist and competition-suppressing power of supply management. Because of the forced delays, Chobani needs an extension to the import permit beyond February, something that must come from trade officials within the federal Department of Foreign Affairs and International Trade. This puts the yogurt-permit ball in Ottawa’s court, where Quebec’s ultra-protectionist dairy players — from farmers to milk-processing giants — have in the past fought the permits in court.
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The permits are a big deal. The import duty on yogurt is an insurmountable 237.5%, part of the trade-killing regime that protects Canada’s dairy industry from competition, keeps prices high in Canada, and prevents Canadian industry from becoming competitive internationally.

Removing the dairy tariffs, which run to 300% on other products, has proved politically impossible. The new Canada EU Trade Agreement, now near conclusion (see commentary below), will apparently do nothing to reduce the prohibitive dairy tariff regime.

Chobani needs an extension of the import permits to give it more time to offset and overcome the massive obstacles created by supply management. It had to work to get Dairy Farmers of Ontario to supply milk. It had to deal with corporate dairy giants in court and fight to untangle the sclerotic provincial and national bureaucratic controls that stand athwart every cow, litre of milk, pound of cheese and cup of yogurt in the country.

While they kept Chobani tied up with red, blue and yellow tape, the existing corporate players in the processing business — the likes of Danone, Ultima Foods and Agropur — mounted a massive Greek yogurt production push.

Over the past year, Chobani has only been able to get its permit-limited supply of duty-free yogurt into a small number of Ontario supermarket shelves. Meanwhile, the big processors — with their boots on the neck of Chobani — flooded the market with Canadian-made Greek yogurt. It apparently now accounts for 10% of the market, up from near zero two years ago.

So the question now is whether it is too late for Chobani in Canada. When I asked Chobani whether an extension of the import permits was the only obstacle to building the plant, the answer was: “The permits are a major factor for Chobani, but there are many logistics and details to work through for a launch of this size.”

A source with some knowledge of the industry said that “logistics” likely means that Chobani faces a major challenge getting onto supermarket shelves. Shelf space is a tricky business under normal conditions, but Chobani must now fight to get its Greek yogurt into coolers already packed with Canadian yogurt.

Peter Gould, head of Dairy Farmers of Ontario, said recently that he believes Ottawa would grant Chobani an import extension if Chobani can firmly commit to building a new plant. Chobani may not be ready to do that. It needs the import permits to build consumer support and help secure supermarket exposure so that when it opens a new plant a year later it has some assurance that it can get its Greek yogurt to consumers. So far, Chobani does not have that market presence and the window of opportunity may be closing.

If Chobani is forced to retreat — its prospects seem grim at the moment — the great Canadian Chobani milk shakedown will go down as another achievement in the twisted history of supply management.

 

[Edward Campbell]

I regularly say that Canada is, in most things, one of the "world's top ten" nations, and, in almost every respect, always in the "top 10%." The Economist agrees in its annual "Top 10 Countiries in Which to be Born" report which is reported upon by The Telegraph:

Top 10:

10. Hong Kong    (7.80/10)
9.  Canada          (7.81/10)
8.  Netherlands  (7.94/10)
7.  New Zealand (7.95/10)
6.  Singapore      (8.00/10)
5.  Denmark        (8.01/10)
4.  Sweden        (8.02/10)
3.  Norway          (8.09/10)
2.  Australia        (8.12/10)
1.  Switzerland  (8.22/10) Best country in which to be born in 2012/13

There's not too much (0.22/10) between 1st and 10th; the survey considers: GDP, life expectancy, quality of family life, political freedom, job security, climate and gender equality, and  economic forecasts for 2030.

And here is an interesting infographic showing the same "best place to born" data from a generation (25 years) ago with 2013:

America, Britain, France et al, the old "top tier" have almost all fallen. Canada and Hong Kong stayed in the "top ten" but fell a few place; Sweden and Netherlands also stayed in the top ten but rose in status. Switzerland, Australia, Norway, Denmark, Singapore and New Zealand all climbed up from the "also rans" to replace the USA, France, Germany, Italy, Japan and Britain in the top ten.

 

[a_majoor]

Want to quickly bouy the economy without increasing government spending? try getting government to follow these recomendations, the amount of money released into the productive economy by eliminating even a large fraction of red tape would be impressive. The NP has been hosting "Red Tape Week" and highlighting other red tape horror stories, so this is well documented:

http://opinion.financialpost.com/2013/01/24/peter-foster-still-strangled-by-red-tape/#more-26544

Peter Foster: Still strangled by red tape

Peter Foster | Jan 24, 2013 8:03 PM ET | Last Updated: Jan 25, 2013 6:15 PM ET
More from Peter Foster

Tony Clement’s plan would cut 0.065% of the regulatory burden

In case you didn’t notice, this was Red Tape Awareness Week. You might also have blinked and missed the Conservative government’s announcement of red tape reform. It’s more likely that you caught a CBC report calling for… more red tape.

On Tuesday, Mother Corp unveiled an undercover, squat-in-the-store-aisle-while-speaking-into-the-secret-camera investigation into the presence of a minuscule amount of expired baby formula on a couple of Vancouver supermarket shelves.

There oughta be a law! Oh, hang on, there is, but the problem, according to the CBC, is that there aren’t hefty enough fines attached. Thus Canadian retailers are free to poison babies at will. For all-too-predictably outraged reaction, our state broadcaster turned to a young Vancouver mother, whom I shall call Tiffany to prevent her embarrassment. She declared “If you have somebody stocking it, first of all, it’s right in front of their faces and they’re putting it onto the shelves. Why can’t they take two seconds out of their lives to actually just peer at it.

True. But here’s an idea, Tiffany. Why not check the date yourself? Presumably that was a big part of the reason product dating was legislated in the first place: to give shoppers a way to ensure they’re not buying out-of-date products. Now, apparently, that’s not enough.

Then again, how can we criticize Tiffany or the CBC when their attitudes parallel those of the president of the United States? Barack Obama, in his inaugural address on Monday, declared that the American people had learned that “a free market only thrives when there are rules to ensure competition and fair play.”

In fact, competition can take care of itself — unless government starts promoting monopolies — and “fair play” might work in cricket but doesn’t apply to free markets.

The main reason sensible store owners do not display expired baby formula — or contaminated cold cuts, or tainted beef, or harmless plastic baby bottles that have been stigmatized by government-promoted junk science — is that once word of this practice got out, they would lose their customers, their reputation, and their business, as would the providers of such goods. However, an unregulated market is simply inconceivable to most people, who have been inculcated in the anti-capitalist zeitgeist of alleged greed-driven, conrner-cutting races to the bottom. Unfortunately, Red Tape Awareness Week, which is promoted by the Canadian Federation of Independent Business, doesn’t exactly represent a clarion call for deregulation, even if the CFIB’s 2013 report on the issue confirms that Canadian business is hardly underregulated. The annual cost is calculated at $31-billion.

One depressing feature of a CFIB survey is that even small business people themselves have — at least by implication — been convinced that, without extensive regulation, health and safety would suffer. The CFIB reports that business owners believe that regulation could be reduced by a third “without affecting the legitimate health and safety objectives.” The CFIB claims this offers the possibility of a $9-billion “stimulus” to the economy, but it also suggests that business people believe the other two-thirds of regulations are necessary.

Stephen Harper presumably appreciates the red tape burden more than his Washington counterpart, and, to be fair, his government is undertaking major reform in environmental regulation (one of the detonators for Idle No More).

Two years ago, Mr. Harper called red tape a “silent killer of jobs.” He announced a Red Tape Reduction Commission headed by Minister of State Maxime Bernier, a true believer in minimal government. The commission produced a list of recommendations that were translated into a Red Tape Reduction Action Plan. One could almost feel the red tape piling up. This week the Action Plan mountain went into labour and gave birth to a smart-regulatory mouse.

Tony Clement, president of the Treasury Board, turned up at a family-run pharmacy in Toronto on Monday to announce a momentous change in the Food and Drug Regulations that would… wait for it… allow regulated pharmacy technicians — rather than pharmacists — to transfer prescriptions from one pharmacy to another. Other changes were announced in business reporting, and to require Canada Revenue Agents to give their ID numbers over the phone.

What was the saving from these initiatives, which Mr. Clement declared were part of “one of the most far-reaching red tape-cutting exercises in the world today?”

Twenty million dollars.

You may have to check my math, but that amounts to roughly 0.065% of the $31-billion regulatory burden. I’d hate to strain my eyes trying to look at red tape exercises that weren’t that “far reaching.” You’d need an electron microscope.

Meanwhile, even the CFIB’s “Ten Point Plan for Effective Regulatory Reform” is much more about refining the existing system than questioning the basis of regulation.

Big companies in fact often quite like ­regulation when it forms a barrier to entry. As the CFIB points out, per capita regulatory burdens fall more heavily on smaller competitors. The CFIB also highlights the regulatory burden on the agrifood business, but how much is that related to the interventions that the agrifood business itself promotes? Finally red tape is supported by a vast army of Yes Minister regulators who are past masters at justifying their own existence. Given all that, and the CBC, red tape isn’t about to disappear any time soon.

As part of a “Red Tape Revolution,” the CFIB has installed an online petition. As of press time on Thursday, less than 3,000 people had signed up.

 

[a_majoor]

"Ontario: Canada's own Greece" has a nice ring as a tourist slogan, no?

The grave danger is that as Ontario's debt grows and economic situation shrivels, we could end up dragging the rest of Canada down. With the Debt already at or near half the size of the Federal debt, and the possibility of it growing to @ $400 billion by 2017, there is the distinct possibility that Ontario's economic mismanagment could capsize the rest of Canada. Just consider what will happen once the Bond Hawks downgrade Ontario (again) and demand higher risk premiums. What will a market driven spike in interest rates do to the rest of Canada, or even the Bank of Canada's pledge to keep interest rates low?

http://news.nationalpost.com/2013/01/31/greece-offers-a-cautionary-tale-fraser-institute-likens-ontario-to-economic-basket-cases-as-provinces-debt-continues-to-climb/

‘Greece offers a cautionary tale’: Fraser Institute likens Ontario to economic basket-cases as province’s debt climbs

Scott Stinson | Jan 31, 2013 2:04 AM ET | Last Updated: Jan 31, 2013 2:09 AM ET
More from Scott Stinson | @scott_stinson

As a new Ontario premier prepares to take office and a finance minister plans to leave his, a new report says the challenges presented by the province’s swollen debt have not been sufficiently addressed — and compares the situation unfavourably to such economic basket-cases as California and Greece.

The 66-page paper from the Fraser Institute, a fiscally conservative think-tank, also argues that under “status quo” policies the province’s debt as a share of its gross domestic product will almost double by the end of the decade. The authors of “The State of Ontario’s Indebtedness: Warning Signs to Act” note that the Liberal government’s own commission on public service reform, which produced the Drummond Report, “should have been a wake-up call … regarding the immediate need for reform of the province’s spending.”

Instead, they write in the report that will be released on Thursday, “the government has chosen to simply slow the rate of growth in spending over the next few years without any serious reform.”

Related
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Fraser Institute criticizes Dalton McGuinty’s ‘poor’ fiscal management in ranking of Canada’s premiers

Finance Minister Dwight Duncan, who has said he will not seek re-election and is expected to resign his Windsor MPP seat sometime in the next few weeks, gave bookend speeches at the start and end of the Liberal leadership race won by Kathleen Wynne that warned the slate of candidates of the difficult economic picture facing the province. Even as he touted in a speech last week that Ontario’s 2012-13 deficit is now forecasted to be $11.9-billion, about $3-billion lower than expected in last spring’s budget, Mr. Duncan said Ontario will have to double its current rate of spending cuts if it is to curb the deficit by 2017-18.

But the Finance Minister also said the Liberals have avoided more drastic measures taken in states like Michigan and California, which have fired public-sector workers by the thousands while dealing with their own budget woes.

The Fraser Institute report, however, argues that from a debt perspective California is in much better shape than Ontario. It says the province “is in a worse position than California on every measure of indebtedness.” Using 2010-11 figures for bonded debt, the report says Ontario had almost $240-billion compared with $144-billion for California, even though the latter has a much larger economy and population. Once the population is factored in, California’s per capita bonded debt of $3,833 is about a fifth of Ontario’s ($17,922).

“For those Ontarians who look at California in puzzlement over its inability to solve its deficit and debt challenges, [we] strongly encourage them to look inward at the severity of their own indebtedness,” the authors note.

Officials in the provincial Finance Ministry, however, disputed the comparison.

“You can’t compare Ontario to California,” said Aly Vitunski, spokeswoman for the Finance Minister. “While they’re facing mass layoffs, we’re freezing wages so we can save Ontario jobs. We’re also undertaking fundamental pension reform to ensure sustainable pensions for Ontarians, while California has been crippled under the weight of the cost of public-sector pensions.”

California, like many U.S. states, also has a constitutional requirement that demands a balanced budget, so it is unable to accumulate debt in the manner that a Canadian province can.

For the comparison with Greece, the report says that country’s net debt-to-GDP ratio was 37% in 1984, “exactly where Ontario’s [ratio] stands today.” Greece, one of the European countries most battered by the global recession, now has a debt-to-GDP ratio of a remarkable 163%. The report argues that if Ontario continues with policies that only serve to slow the rate of spending growth, “Greece offers a cautionary tale.”

National Post

sstinson@nationalpost.com

 

[Dissident]

My limited understanding is that Quebec is the "Greece" of Canada.
Ontario would be the... France? Spain? Italy? of Canada?

ETA: What do I know anyways.