economics

Oil buck$

Playing around on the internet at lunch today, I came across a couple of interesting databases that confirm, at least visually, that we are a petro-economy. With data on the daily price of West Texas crude from the Federal Reserve Bank of St. Louis (thanks Google!) and daily foreign exchange closing data the following graph shows graphically just how linked the Canadian dollar value is to the price of crude oil. crude_dollar

I haven’t the statistics background to tell you *how* linked they are, but the picture is stark and convincing.

If, and this is a big “if”, the value of our currency is a reflection of the attitudes of investors on the strength of the Canadian economy, what they see in us is pretty apparent. Note that this graph goes back to the start of 1999, the earliest I could find currency data for, and the trend pre-dates the Conservative government, upon whom I blame all things bad. This one has not been helped by them, but it was not caused by them. I fully expect that pushing both of these databases further into the past would reveal a similar pattern for at least a generation or os.

It’s easy to draw up a couple of curves for unrelated things and claim some sort of linkage between them where none exists – follow this link to see some fun ones. I would argue that these curves are in fact related because they are normalized using the US dollar. This is a useful measure, as all formal trading in international oil bourses has used the US dollar as the price by which oil is set since the early seventies.

What does this graph mean?

First, if we really are a petro-economy, we had best keep finding and exporting oil if we want our dollar to be worth anything. Oil and gas are not going to last forever, though, and nor should they. The tar sands represent the last gasp of the Alberta oil industry, and while it could last for many years, it is still finite. East coast gas has proven to be a disappointment, at least while the peasants are still allowed to get their asses up about fracking. (C-51 may well settle that issue by making anyone protesting the destruction of their watertables for short-term profit a ‘terrorist’. We shall wait and see.) Atlantic oil flows from the Grand Banks, and there is every chance of other discoveries up the margin along the Labrador shelf and Baffin Bay, but development in these areas is still in its infancy. And Arctic resources are likely to be harder and therefore more expensive to access, making them less economically advantageous. Hopefully, before they become an issue we will be moving away from oil as our central fuel source.

The recent crash in the Canadian dollar and the simultaneous precipitous drop in the price of oil also has to do with our little normalizing factor up there, the value of the US dollar. The US economy has been booming along the last couple of years as they distance themselves from the depths of the 2008-09 recession. Job growth is up, exports are up, and they have quietly become the world’s largest producer of oil. For now, this spike in production south of the border has not been offset by cutbacks in OPEC production, and the price has been allowed to fall. How long this will go on is anyone’s guess and I’m not going to venture one.

Historically, Canada has been a resource-sector economy – we don’t really make much, instead we produce raw materials that are turned into goods by others, which we then buy from them. There is no shame in that, and the scenario works well provided the supply of raw materials is not exhausted. We are a fishing economy, a lumber economy, a farming economy, an oil economy, and a mining giant. There is no reason to think that these will all disappear after the oil goes. Whatever happens, resource exports will always be important.

However, as this graph and our fluttering economic growth show, when we become too dependent on one thing, we put ourselves at risk. And, this is where I can place some blame on the Conservative government. Instead of trying to promote industrial growth and manufacturing, the government sat on its hands while the high value of the dollar murdered our exporters. If we are to prosper as a nation, we need wise and courageous leadership to help foster blended economic growth. As I’ve said, resources will always be important, but there is no reason we can’t make stuff, too.

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economics

A simple question, unanswered

If the Trans Pacific Partnership is really the biggest game on the planet, why really is it okay to negotiate it in complete secrecy? Secrecy to the point that our elected representatives, who theoretically should have our best interests at heart (heh) can’t even see the thing? Why is it that the only details we can see are those that have been released via wikileaks?

Okay, there were a few questions there, but they are sequential and related. I consider them a unit.

Since we are well and truly in election campaign mode (really, when aren’t we?), why is this not the biggest single issue on everyone’s lips?  It basically affects every possible economic issue you can imagine.

At its core, the TPP is about promoting foreign investment and protecting investors. It has everything to do with competitive advantage, share price, profits, and nothing at all to do with jobs, the environment, or standards of living. It is therefore very important to anyone concerned at all with income disparity. Like her politics or not, Maud Barlow is absolutely right in describing this as a “deal for the 1%”. The information we have so far, some of which I cite below, is not hopeful. The sky might not actually be falling, but without any hard information, how are we to know?

The sky isn’t falling? Show me, prove it. Until then, here are a few little snippets teased out of the wikileak:

On the environment:

Instead of a 21st century standard of protection, the leaked text shows that the obligations are weak and compliance with them is unenforceable. Contrast that to other chapters that subordinate the environment, natural resources and indigenous rights to commercial objectives and business interests. The corporate agenda wins both ways.

This means, fewer protections for the environment and few pesky regulations getting in the way of “commercial objectives”.

On jobs (note, this paragraph was written in an American context, but the Canadian situation is similar and may in fact be worse):

A leaked text revealed that TPP is slated to include the extreme foreign investor privileges that help corporations offshore more U.S. jobs to low-wage countries. These NAFTA-style terms provide special benefits to firms that relocate abroad and eliminate many of the usual risks that make firms think twice about moving to low-wage countries.

Under the NAFTA model, U.S. manufacturing imports have soared while growth of U.S. manufacturing exports has slowed.

Are you happy with the jobless recovery? Just wait, it’s gonna get even better!
On pharmaceuticals (note that according to this article, the Canadian government is fighting this, but we are a very small dog in this fight.):
We know from leaks of the TPP draft text that some governments are attempting to dismantle public-health safeguards enshrined in international law by extending the length of time that brand-name medicines are protected by patents to create new types of monopolistic protection. As a result, pharmaceutical companies will be able to charge unduly high prices for several more years, thereby restricting access to affordable life-saving generic medicines. This will disproportionately affect those who can least afford to pay.
Where are the political parties on this issue? It’s not that straightforward. Corporation-friendly regulatory regimes are right up Conservative Alley, but with all negotiations in secret, it is not easy to see where the Canadian government is in agreement and where it has problems. The Liberals and the NDP likewise have been wishy-washy about the deal, hoping I expect that it doesn’t become an issue that they have to debate openly. There are tough discussions to be had here, tougher for all the silence. I would love to change that.

Let’s make the parties talk!
economics

It has come to this…

I have been placed in a very weird position. This week’s election results in Alberta, in which Rachel Notley handed Jim Prentice an historic electoral slapping, has made me agree, I think for the first time, with something said by Kevin O’Leary, the bloviating former CBC in-house tycoon.

In his reaction to Notley’s win, which naturally he wasn’t real happy with (caution, clicking link will produce a visual of Kevin O’Leary speaking words), he predicted “disaster” in what “was the shining light of capitalism in North America”.

I disagree with the certainty of the coming disaster, but I cannot agree more that Alberta was the shining light of capitalism in North America. Well, at least the modern incarnation of capitalism. The reason, to put it bluntly, is that modern capitalism has little to do with the actual production of goods or services and more to do with the blind extraction of money in the most direct way possible. Alberta, sitting on lakes and lakes of liquid money, was indeed a veritable nirvana of “capitalism”.

The problem for Albertans with that is obvious – what happens when the oil, the oil companies, and the high-paying oil company jobs, are all gone? This “shining light of capitalism” has done relatively little to build an economy that is equipped to make this transition, and the transition is going to come one way or another, very soon. Whether it is because the last oil is drained from the last reservoir or because technological advances motivated by climate change reduces our reliance on hydrocarbons, the time is coming.

Of course it’s not the job of modern capitalism to plan for this. Modern capitalism is not much more than a shareholder demanding quarterly gains, details and future be damned, and when the money stops coming from one location, he simply moves to another more profitable place like a modern-day pilgrim.

Notley, by all accounts, is a pragmatic politician and will know both that right now petroleum is a large part of Alberta’s economy and that it is a rapidly diminishing resource. It’s not really a secret that the main reason the tar sands are being exploited now is that they are the last large petroleum reserve left in the province. Sure, production and exploration continue elsewhere, and new fields are being discovered, but new discoveries are few and small in comparison, and significant finds are becoming increasingly unlikely.

By exploiting a controversial, expensive, and damaging resource like the tar sands, it is obvious that Alberta is beginning the transition to a post-petroleum economy, whether they will admit it or not. They need someone at the helm that can steer the transition. Whine as O’Leary might, the grown-ups have to worry about the future of the province, and the Progressive Conservatives have shown no indication that they were at all interested in doing that. They chose the easy way out every time – expanding resource extraction while keeping regulations and taxation as corporation-friendly as possible in order to keep the easy money flowing.

It is too early to say how Notley will handle these challenges, but O’Leary’s contention that Alberta “was” the shining light of capitalism is absolutely right, but not for the reasons he thinks. Capitalism in it’s current form is broken, plain and simple, and Alberta is a fine example of why.

economics, taxation

Nick Hanauer identifies the cart and the horse…

In his video that the TED series wouldn’t air as being ‘too political’, the venture capitalist Nick Hanauer points out the fallacy in the argument that the wealthy are ‘job creators’ and that taxing them provides hurts the economy. He argues that jobs are in fact the last thing a business invests in, and it will only do so when demand in the product or service provided make it absolutely necessary. He goes on to argue that high taxes are in ultimately better for business, as they provide for a wealthier and healthier middle class, which in the long run is the consumer base most businesses require.

In short, Henry Ford was right and modern ‘capitalists’ like Grover Norquist and Mitt Romney are not. Take the five minutes and fifty seconds to watch the video. It’s worth it.

culture, economics, justice, law, media, politics, Things We Should Know

G20, Canadians 0

I have been following, probably to a lesser degree than I might have, the protests surrounding the G20 summit in Toronto. What I find interesting is that the summit itself has been eclipsed by the violent clashes occurring outside the security perimeter – perfectly natural, after all, violence has always provided better ‘copy’ than negotiation and discussion. In that sense, the protesters have accomplished one mission: their messages are being covered, if only in a primarily negative fashion and only as a peripeheral story to their methods of propagating the message.

For what it’s worth, I wish to offer a few observations:

It is important for the general public to remember that all of the protesters are not violent, and all of those acting violently are not legitimate members of social activist groups – it is said by some that there is a cadre of ‘professional protesters’ who travel from event to event to cause disruption. I would certainly not want to see everyone painted with the same broad brush as ‘violent’ or ‘irresponsible’. Nor, as it happens, do I particularly like having all police portrayed as ‘jack-booted thugs’ or provocateurs. There is reportedly evidence that some covert provocation by undercover police has occurred in the past, however, in the age of YouTube and the ‘citizen journalist’, such actions are a clear liability. The police are paid to maintain order, and I have no doubt that they arrived on the front lines with the ideal of doing this job – that being said, police, first and foremost, are human beings, and human beings make mistakes; they lash out when attacked, due to fear (they are greatly outnumbered by shouting, angry protestors), or out of an over-developed sense of duty. The violent members of the police services, as with the protestors, are vastly outnumbered by those who do their jobs well, and with integrity. Remember that just because the violent individuals on both sides get the most attention, that does not make them representative of the whole.

Speaking of representation, I was interested and curious after reading some stories on the CBC as to whether or not many of the individuals, violent and otherwise, among the protesters are politically active in other ways, such as voting. A quick search revealed this study, which indicates that surveyed individuals in the 15 to 21 and 22 to 24 year-old age groups are the most active in “non-voting political behavior”, and the least active in actually voting (even allowing, of course, for the fact that the voting age is 18). While understanding that younger adults are cynical and disillusioned with the political process, I think we have done a poor job in educating younger people about the importance of voting – it is the acceptable democratic method of social change, as opposed to the proposed ‘violent revolution’. We already have the means to enact social change and ensure that the individuals who represent us truly have our best interests at heart – the organized, purposeful, collective casting of ballots. Demanding social change while declining to participate in any meaningful way in the process available seems dishonest, in my opinion. Call me naive if you must, but I’m an optimist – I believe if we truly want social change, if we want to replace the current regime, it is within out power collectively as Canadians to create the change – ‘be’ the change, in other words. Revolution worked in Russia in 1917, but is unlikely to have any meaningful effect beyond the disruption of the lives and livelihoods of individuals not even concerned with the protests – the small businessmen and so on. If you want justice, you have to be a full participant in the creation of the just society, become one of its builders, and not focus on the violent destruction of the old regime. Each of us, every day, in any given moment, create and maintain justice within society according to our moral codes – let that creation dominate through the political process rather than abetting wanton destruction.

Beyond (and inextricably bound within) the political is the personal – how we act, what we do, whom we choose to help or hurt. Concern for our fellow citizens – the expression of justice, of tolerance and of lending assistance where possible – is the basis of democracy, particularly a democracy such as ours which is based on a pretty good (but not perfect) social safety net. Behind this altruism, however, is the single most important unit of society, the individual, who maintains (or breaks) the social covenant as she sees fit on a constant basis through interactions with others – society is not imposed from the top down, but is built and maintained, moment by moment, by the individuals, the ‘bricks’ that are its component parts. Humanity, however, is descended from animals (no matter what creationists may tell you), and the proof of this ascent lies in our behavior, in the actions between thoughts, in our instincts. One of the more fascinating parts of Social Psychology lies in the realm of Collective Behavior, as discussed with great clarity over the years by writers such as Eric Hoffer in The True Believer, and by Erich Goode in the excellent textbook Collective Behavior (who knew?). Human social interaction is by nature complex, but the behavior of crowds as they become mobs has been examined in great detail, and is, to some degree, predictable. The social dynamics of the crowd-to-mob transition rely on  particular elements to unfold: first, the ‘power’ granted to the individual by the collective – to put it another way, as individuals, we can be known quantities; as part of a collective, we are anonymous, and therefore more free to express ourselves physically and emotionally – witness on a small scale the strident nature of the anonymous message boards on the Internet, and keep in mind that each of these is a building block of a collective expression of order or disorder. Second, observation of crowds has proven the importance of leadership – one or more individuals, usually a small number, who define the ‘agenda’ for the collective. How they act sets the tone for the dynamics that follow. If, for example, the natural leaders from whom the collective takes their cues are peaceful by nature, the dynamic will remain a peaceful one – which is why all crowds, at concerts and sporting events, do not become mobs. On the other hand, if the leaders, being more expressive or lacking impulse control, are more violent or begin to destroy property, then the crowd’s transformation to a mob is virtually assured – in many cases, all it takes is one act of violence to transform the collective, empowered by the anonymity of numbers, into the anarchist army. Third, there must be that act – the violent action, the thrown brick or punch, that acts as the ‘tipping point’ in the collective mood, and unless the emotional impact of this act is diffused immediately, the transition is inevitable. It is for these reasons, despite complaints of excess on the part of police and security services, that motivates the array of precautions in Toronto. The police understand the potentially negative consequences of collective behavior, even if we or the protestors do not.

Finally, as time goes on, the patient observer will take note of the escalating rhetoric on the Internet, again motivated by anonymity and the protection it provides. The attacks will become more personal and the rhetoric more heated, until the faceless and inherently evil ‘liberal’ or ‘conservative’ Other becomes unworthy of respect or calm dialogue – in fact, as individuals, they are to be torn down and destroyed as effectively as are physical structures. Although not a physically ‘present’ collective, the concept of the tipping point still applies – the first one to ‘flame’ the opposition sets the tone for what follows, despite the efforts of some individuals to foster a more civil dialogue. The Other, meanwhile, becomes dehumanized, and the attacks become personal, until the level of vehemence approaches a point which would never be reached in a face-to-face confrontation on the same subject.

I make these observations with a goal in mind – not to bore you, as may well be the case, but hopefully to point out the imperfections of both sides in this ‘struggle’. I don’t pretend to be an expert in capitalism or colonialism, so I have deliberately left these issues out of the equation; ultimately, these are but ideologies which require human agency to exist.

And that’s the point, really – despite the perception of the monolith labeled ‘SOCIETY’ that we percieve, we, individuals, citizens, police and protesters, are society writ small. And, frankly, it is a little humbling, despite the accelerated growth of technology,  just how fragile our collective is, under the right conditions. In the building of a society, we are all keystones.

Note: Edited to reflect a quite accurate comment that I had stated an opinion as fact.

Canadian politics, Conservatives, economics, I got your stimulus right here, right-wing tomfoolery

The Republic for Which it Spams…

Ma Belle Mére, as is her habit, has passed on to me the link to an interesting website, sponsored by the Liberals, which describes the Harper government’s usage of taxpayer funds as vote-buying capital. Not only interesting, but I love the name – kudos to the unidentified staffer who came up with this one. Ladies and Gentlemen, I give you: The Cheque Republic.

Merci bien, Belle Mére!